Option Premium..!
The premium amount is the price paid by the buyer to the seller to acquire the right to buy or / sell a stock or Index.
Strike Price or / Exercise Price..!
The strike or / exercise price of an option is the specified / or pre - determined price of the underlying asset (stock or Index) at which the same can be bought or / sold if the option buyer exercises his right to buy / or sell on or before the expiration day.
The date on which the option expires is known as Expiration Date.
On Expiration date, either the option is exercised or / it expires worthless.
Exercise Date..!
The date on which the option is actually exercised is called as Exercise Date.
In case of European Options the exercise date is same as the expiration date.
In case of American Options, the options contract may be exercised any day between the purchase of the contract and its expiration date.
In India, options on Sensex Index are European style. Options on individual are stocks American style.
Open Interest..!
The total number of options contracts outstanding in the market at any given point of time.
It is One who buys an option, which can be a call, or a put option. He / she enjoys the right to buy or / sell the underlying asset (share or Index) at a specified price on or / before specified time.
His /her upside potential is unlimited while losses are limited to the Premium paid by him / her to the option writer.
Option seller or / writer..!
It is the one who is obligated to buy (in case of Put option) or / to sell (in case of call option), the underlying asset (share or Index) in case the buyer of the option decides to exercise his / her option. His / her profits are limited to the premium received from the buyer while his downside is unlimited.
Option Series..!
An option series consists of all the options of a given class with the same expiration date & strike price.
Example.
BSXCJune15550 is an options series which includes all Sensex Call options that are traded with Strike Price of 15550 and Expiry in June. (BSX Stands for BSE Sensex (underlying index), C is for Call Option, June is expiry date & strike Price is 15550).
Thanks for sharing this information which are very useful for us.keep sharing more and more.
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John Methew
Options Trading