Important Terminology in Options ?
Option Premium – Premium is the price paid by the buyer to the seller to acquire the right to buy or sell Strike Price or Exercise Price – The strike or exercise price of an option is the specified/ predetermined price of the underlying asset at which the same can be bought or sold if the option buyer exercises his right to buy/ sell on or before the expiration day. Expiration date – The date on which the option expires is known as Expiration Date. On Expiration date, either the option is exercised or it expires worthless. Exercise Date – The date on which the option is actually exercised is called as Exercise Date. In case of European Options the exercise date is same as the expiration date while in case of American Options, the options contract may be exercised any day between the purchase of the contract and its expiration date (see European/ American Option). In India, options on “Sensex” are European style, whereas options on individual are stocks American style. Open Interest – T
