right to buy or sell a financial product (eg action) at a predetermined price (strike or exercise price).
The exercise of the option may be either a specific maturity date (option "European") or during a period to maturity (option "American").
In return for this right the buyer of the option pays a premium (or premium).
An option is said in the currency (in the money) when its exercise provides a gain to the holder. She is said to be out of money (out of the money) otherwise. Finally, if the exercise price is equal to the value of the underlying, the option is the currency (at the money).
Price option will depend on:
- exercise price: the more it will be removed from the market price on the date of the contract the more likely to exercise the option will be low and therefore the higher the price of the option will be low.
- the date of maturity: the more it will be removed from the day the contract is more likely to exercise the option will be strong and therefore the higher the option price will be high.
- the
volatility of the underlying asset: the more it will be stronger, the probability of exercising the option will be strong and therefore the higher the option price will be high. Different models
Avaluator options exist. the best known is the model Black-Scholes
