Option(by Stella Osoba) - 趙永祥的數位歷程檔

Options are financial instruments based on the value of an underlying security such as a stock. An options contract offers the buyer the opportunity, but not the obligation, to buy or sell the underlying asset depending on the type of contract they hold. Unlike a futures contract, the holder is not required to buy or sell the asset if they decide against it.

Each options contract has an expiration date by which the holder must exercise their option. The stated price on an option is known as the strike price. Options are typically bought and sold through online or retail brokers.

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Why Is 'Option' the Term of the Day?

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As a derivative contract, the value of an option is driven by the performance of an underlying asset. In the case of stock options, the value of the options contract is derived from the market price of the underlying stock.

Options can be distinguished into call and put options. The buyer of a call believes that the shares of the underlying company will rise, while the buyer of a put believes they will fall. Each time an options contract is traded, a counterparty takes the opposite side of the transaction. For every buyer of a call or a put, there is a seller known as the writer of the contract, who collects a premium.

Though the writer or seller of the option collects a premium, they are exposed to more risk than the buyer. The buyer's risk is generally limited to the amount of premium paid, while the seller’s risk can theoretically be unlimited depending on the performance of the underlying security. For example, the seller of a put option, who bets that a stock’s price will fall, can theoretically face unlimited losses if the price of the underlying stock continues to rise.

Options trading is risky and can expose a trader to substantial risk of loss. It’s an advanced trading strategy not recommended for inexperienced investors.

-Stella