An investor, for example, might wish to have the right to sell shares of a stock at a certain price by a certain time in order to protect, or hedge, an existing investment. Put Option. An option anx in which the holder has the right but not put option and call option nutrition obligation to sell some underlying asset at an agreed-upon price on or before the expiration date of the contract, regardless of the prevailing market price of the underlying asset.
One buys a ntrition option if one believes the price for the underlying asset will fall by the end of the contract. If the price does fall, the holder may buy and resell the underlying asset for a profit. Just as there are two different types of options ( puts and calls), so there are two main styles of options: American and European. Many rookies have suffered unnecessary losses because they were unaware of the differences. In options trading, the option holder has the right, but not the obligation, to buy or sell the underlying instrument at a specified price on or before a specified date in the future.
If the holder decides to buy or sell the underlying instrument (rather than allowing the contract to expire worthless or closing out the position), he or she will exercise the option, and make use of the right available in the contract. Call BuyerA call option buyer benefits when the underlying opiton price goes up. The buyer can exercise a call and receive shares at a discount below their current market price.