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Who pays the premium in a put option stock


Who pays the premium in a put option stock


This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (November 2015) ( Learn how and when to remove this template message)In finance, a put or put option is a stock market device which gives the owner of a put the right, but not the obligation, to sell an asset (the underlying), at a specified price (the strike), by a predetermined date (the expiry or maturity) to a given party (the seller of the put).

The option premium is primarily affected by the difference between the stock price and the strike price, the time remaining for the option to be exercised, and the volatility of the underlying stock. Affecting the premium to a lesser degree are factors such as interest rates, market conditions, and the dividend rate of the underlying stock. Because the value of an option decreases as its expiration date approaches and becomes worthless after that date, options are called wasting assets.

The total value of an option consists of intrinsic value, which is simply how far in-the-money an option is, and time value, which is the difference between the price paid and the intrinsic value. Understandably, time value approaches zero as the expiration date nears. also called option price. For the employee incentive, see Employee stock option. The strike price may be set by reference to the spot price (market price) of the underlying security or commodity on the day an option is taken out, or it may be fixed at a discount or at a premium.

An option premium may also refer to the current price of any specific option contract that has yet to expire. Options are a type of derivative security. They are a derivative because the price of an option is intrinsically linked to the price of something else. Specifically, options are contracts that grant the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.

Also known simply as option price. Not to be confused with thestrike price. Market price, volatility and time remaining are the primary forces determining the premium. There are two components to the options premium and they are intrinsic value and time value. Intrinsic ValueThe intrinsic value is determined by the difference between the current trading price and the strike price.

Only in-the-money optionshave who pays the premium in a put option stock value. Intrinsic value can be computed for in-the-money options by taking the difference between the strike price and the current metatrader fxopen download lagu price. Out-of-the-money options have no intrinsic value.




Who in premium put the a option pays stock

Who pays the premium in a put option stock

Who pays the premium in a put option stock