Option: Option is a contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument. There are two types of options: Put Options and Call Options.
Euro: Euro is the official currency of most members of the European Union.
European Option: An option that may be exercised only on the expiration date in opposite to American Option that may be exercised any time before expiration date.
Exercise: Exercise is the action taken by the holder of a call option if he wishes to purchase the underlying futures contract or by the holder of a put option if he wishes to sell the underlying futures contract.
Expiration Date: Expiration Date is the last date on which an option may be exercised. This is the date on which an option contract automatically expires; the last day an option may be exercised. It is not uncommon for an option to expire on a specified date during the month prior to the delivery month for the underlying futures contracts.
On an option exchange, every 3rd Friday of the month is expiration day for monthly options. A number of option series expire on this day.
At expiration all call options with a higher strike price than the expiration price of the underlying stock/currency or index will be worthless. All series with a lower strike price will have value and will be exercised. In the case of put options the opposite applies.
For all holders of call options it will be optimal when the value of the positions at expiration is as low as possible.
Options expiration date is the most important factor in calculating an options price:
Labels:
Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.