An option gives the right to buy ('call') or sell ('put') shares at a fixed 'strike' price, but only before an agreed date when the option expires. The person selling ('writing') the option needs to judge whether the price will rise or fall, and by how much. They hope the option will expire unused, meaning they keep the premium paid by the buyer for doing very little.
Insurers are like option writers homeowners pay premiums to receive a payout in case of disaster. Insurers calculate premiums using similar probability-based principles to option writers. If in doubt, they overcharge; few homeowners know how to price risk and would still insure even if they did. So optionality, exploited correctly, can be quite profitable.
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Inflation holds steady at 3.8% ahead of BoE meetingThe rate of inflation did not rise in August, but the Bank of England is still expected to keep interest rates on hold tomorrow
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Thousands of savers with £250k pensions take cash over tax-free money and IHT fearsWith a record £70 billion withdrawn from pensions in the year to March, experts are concerned savers are making knee-jerk decisions without advice that could affect their long term wealth
