What is important terminology connected with Options?
Option Premium – Premium is the price paid by the buyer of the option to the seller of that option to acquire the right to buy or sell Strike Price or Exercise Price – The Strike Price 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 date. Expiration Date – The date on which the option is actually exercised is called as Exercise Date. In case of European Options the exervise date is same as the Expriy date whereas in case of American Options, the options contract may be exercised any day between the purchase of the contract and its Expiration Date. Open Interest – The total number of options contracts outstanding (Open Positions) in the market at any given point of time. Option Buyer / Holder – is one who buys an option. It can be a call or a put option. The holder / buyer of an option enjoys the right to buy or sell the
