Option
An option is simply the right to buy (a 'call' option) or sell (a 'put' option) a quantity of any asset by an agreed expiry date for a fixed ('strike') price.
An option is simply the right to buy (a 'call' option) or sell (a 'put' option) a quantity of any asset by an agreed expiry date for a fixed ('strike') price.
As with insurance policies, the buyer of an option pays a non-refundable premium to the seller for the right to either exercise the option before it expires, or abandon it. So, someone who holds gold and is worried about the price falling but doesn't want to sell in case they are wrong could buy a threemonth 'put' option instead.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Sign up for MoneyWeek’s free twice-daily newsletter.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
