GRK 0.00% 0.2¢ green rock energy limited

An options gives the holder the right (option) but not the...

  1. dej
    383 Posts.
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    An options gives the holder the right (option) but not the liability to purchase the amount of an underlying asset (eg shares) at a certain price before a certain date. It is a way to reduce risk in investing in a stock by reducing how much you can lose (e.g. share price stays below the strike price then you dont exercise your options and you only lose what you paid for the options, rather than the loss in price of the share).

    Thats a very brief overview, you can understand when you come to calculating the price of an option at a certain time etc etc it becomes complicated once again as the price of the option SHOULD have already priced in the risk of the underlying asset. So if you want to make money you have to fully understand the underlying asset probably to the same extent as if you where just to invest straight into it.

    If you want more understanding just google the bad boy, or become a CFA
    Last edited by dej: 05/09/14
 
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