An option is a contract that grants the right, but not the obligation, to buy or sell an underlying asset at a predetermined price at a specified time or within a specified period. There are two main types of options: calls (the right to buy) and puts (the right to sell). It’s important to understand that an option itself does not guarantee a profit; it merely provides the opportunity to take advantage of a specific market situation should it unfold.
An option’s structure includes several key elements: the strike price (exercise price), the expiration date (the end of the contract), and the premium—the price of the contract itself. The premium is determined by a variety of factors, including the volatility of the underlying asset, the time remaining until expiration, and the current market price. These parameters make options flexible, but they also require the user to understand their interrelationships.
Before trading options, it’s important to familiarize yourself with the official documentation, particularly the “Characteristics and Risks of Standardized Options,” a document developed by regulators to inform market participants. Options trading is not suitable for everyone due to specific risks, including the possibility of losing the entire premium paid. Our goal is not to spur action, but to help you develop a clear understanding of the instrument’s structure.
