Hi,
moomoo ID:NaN
Log Out
ENGLISH
  • ENGLISH
  • 中文繁体
  • 中文简体
donwloadimg

Download App

Log in to access Online Inquiry

What Is An Option?

Views 30k2022.09.21
playBtn

Key Takeaways

  • An option is a contract that gives its holder the right to buy or sell an underlying asset at a certain price for a limited period of time. 

  • There are five basic factors of a standard option: the underlying asset, premium, strike price, contract type, and expiration date.

Understanding

An option is a contract that gives its holder the right to buy or sell an underlying asset at a certain price for a limited period of time. There are five basic factors of a standard option contract:

  1. Underlying asset. An Option's price is derived from the underlying asset that it tracks. The underlying asset could be stocks, market indices, exchange-traded funds, bonds, currency, interest rates, or futures contracts.

  2. Premium. An option premium is a price paid by the buyer to the seller for an option contract or the current price of an option contract that has yet to expire.

  3. Strike price. The strike price is the price at which the holder of the option contract may buy or sell the underlying asset. It is also known as the exercise price. 

  4. Contract type. There are two types of options: calls and puts. A call gives the buyer the right to buy the underlying asset at the strike price for a limited period of time. Conversely, puts give the buyer the right to sell the underlying asset at the strike price for a specified period of time. 

  5. Expiration date. This is the date on which the option expires. If an option has not been exercised prior to its expiration, it ceases to exist— that is, the option holder no longer has any rights, and the option no longer has any value. The style of an option refers to when that option is exercisable. The most common styles are the American style and the European style. The American style option may be exercised at any time prior to and including the day of expiration. The European style option is exercisable only on its expiration date.

Trade like a pro with moomoo

Get free stock and start your professional trading today

Terms and conditions apply right-arrow
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal.Moomoo is a financial information and trading app offered by Moomoo Technologies Inc.In the U.S., investment products and services available through the moomoo app are offered by Moomoo Financial Inc., a broker-dealer registered with the U.S. Securities and Exchange Commission (SEC) and a member of Financial Industry Regulatory Authority (FINRA)/Securities Investor Protection Corporation (SIPC).In Singapore, investment products and services available through the moomoo app are offered through Moomoo Financial Singapore Pte. Ltd. ("Moomoo Financial SG") regulated by the Monetary Authority of Singapore (MAS). Moomoo Financial SG is a Capital Markets Services Licence (License No. CMS101000) holder with the Exempt Financial Adviser Status. This advertisement has not been reviewed by the Monetary Authority of Singapore.In Australia, financial products and services available through the moomoo app are provided by Futu Securities (Australia) Ltd, an Australian Financial Services Licensee (AFSL No. 224663) regulated by the Australian Securities and Investment Commission (ASIC). Please read and understand our Financial Services Guide, Terms and Conditions, Privacy Policy and other disclosure documents which are available on our websites https://www.futuau.com and https://www.moomoo.com/au. Moomoo Technologies Inc., Moomoo Financial Inc., Moomoo Financial Singapore Pte. Ltd. and Futu Securities (Australia) Ltd are affiliated companies.
Expand

Recommended