Put and call options shares
Articles needing additional references from October All articles needing additional references. The following factors reduce the time value of a put option: Put Options and Call Options Perhaps we can explain options a bit more clearly.
Trading options involves a constant monitoring of the option value, which is affected by the following factors:. Determining this value is one of the central functions of financial mathematics. The most obvious use of a put is as a type of insurance. The purchase of a put option is interpreted as a negative sentiment about the future value of the underlying. A European option can only be exercised at time T rather than any time until Tand a Bermudan option can be exercised only on specific dates listed in the terms of the contract.
Please help improve this article by adding citations to reliable sources. That is, the seller wants the option to become worthless by an increase in the price of the underlying asset above the strike price. Views Read Edit View history.
Because you can force the seller of the option to buy your shares at a price above market put and call options shares, the put option is like an insurance policy against your shares losing too much value. The seller or "writer" is obligated to sell the commodity or financial instrument to the buyer if the buyer so decides. During the option's lifetime, if the stock moves lower, put and call options shares option's premium may increase depending on how far the stock falls and how much time passes. The put buyer either believes that the underlying asset's price will fall by the exercise date or hopes to protect a long position in it.
Option pricing is a central problem of financial mathematics. The terms for exercising the option's right to sell it differ depending on option style. But there are many options strategies that amount to little more put and call options shares gambling and can increase your risk to a frightening degree. This page was last edited on 30 Marchat