What Are Options?
An option is a financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a certain date.
Now let’s Understand the definition of an option (a derivative) by breaking it down into simpler terms:
“Holder” – buyer
“Right, but not the Obligation” – this is important!
“Underlying Asset” – this can be anything – equity, commodity, currency, interest rate
There are two types of options: call options and put options.
You buy call options if you are bullish.
You buy put options if you are bearish.
You can also sell options!
Option sellers are also called Option writers. These writers are generally big players. It is said that – they eat like chicken but shit like elephants!