One of the key components of an options trade is its premium, i.e., the monetary amount paid by the buyer to the seller. Its size depends on the level of risk assumed by the seller. In economics, everything is measurable, and even risk can be calculated and given an exact price. For this, several models for calculating the premium were created in the options market, the most popular of which uses values such as the intrinsic and time value of the option.
Any deal, whether it’s an options, forward, or futures contract, implies a bilateral agreement. The option holder and the seller of the security are the main participants in the options market. By entering into an agreement, each of them assumes mutual obligations and receives certain rights.
The term "option" refers to a security that grants the right, but not the obligation, to buy or sell an asset at a fixed and unchanging price. Depending on the type of underlying asset, the security can be divided into three types, one of which is the commodity option.
At the beginning of 2008, the FORTS exchange announced the introduction of a new financial instrument called the margined option. For a long time, it remained a major topic of debate among participants of the Russian derivatives market. Today, the controversy has subsided, and it's possible to evaluate the results: is this model of financial markets effective, how does it differ from the standard one, and was the introduction of margined options really necessary for the market and its participants?
Options can be divided into two main types: put options (for selling) and call options (for buying), but this is not the only classification of this type of security. Experts also distinguish three types of deals depending on the underlying asset. One of these types is the stock option.
In some articles and forums, you can come across the interesting term “vanilla option.” It is especially often contrasted with binary options or seen in phrases like “binary options originated from vanilla options.” But few people can actually explain what it means. This gap in knowledge needs to be urgently filled.
As is known, options are a type of security, and all securities can be divided into exchange-traded and over-the-counter. Exchange-traded options are mostly purchased by individuals whose main goal is to earn as much profit as possible through trading without making large investments. Over-the-counter options are a more global financial instrument, typically used by large companies. Let’s take a closer look.
The Russian stock market is developing rapidly: all conditions are being created for the productive work of brokers and traders, and new directions in the industry are emerging. Independent financial organizations and new derivative instruments have begun to appear. It’s not always easy to keep up with such progress, and often traders and ordinary people struggle to understand certain definitions and terms. For example, the question often arises: what are FORTS options?
Every type of security must be fully regulated by special agencies and legal standards. For this purpose, there are non-profit organizations that ensure lawful trading conditions for securities. Usually, these are large institutions that handle all types of contracts, but there are also specialized ones — for example, an options exchange.
The options market is an independent financial sector. In a relatively short time, options have penetrated both exchange trading and business relations between large companies. There are about a dozen different types of options, each with its own use and specific features. Today we’ll talk about the concept of a double option.