Option contracts is a contract which, in exchange for a premium, gives the purchaser the right (no obligation) to buy or sell financial assets at a price at a specified date (expiration date) or earlier.
Futures contract is a contract to buy or sell (futures) or that represent rights (options) to buy or sell a foreign currency at a particular price within a specified period of time.
The main difference between the options and futures is that futures is the obligation, as an option is the right
Options is the right either to buy or to sell an asset (in our case – futures) at a fixed price at any time during a certain period of time.
An option that gives the right to buy an asset – futures, known as CALL; option, which gives the right to sell futures, is called PUT.
At any given time, the buyer (holder) of option can fulfill it. In this case, recorded the sale of a futures contract at a price equal to the price performance option, this means that the option shares on the futures contract.
In the case of the execution of CALL option buyer of an option becomes buyer of futures and the seller of an option becomes the seller of futures. In the case of execution of PUT option buyer the option becomes a seller of futures and option seller becomes a buyer of futures.
In addition to the buyer’s ability to execute the option at any time, there is also an opportunity for both the buyer and the seller of option to close its position through the backward transaction (as futures).
One must distinguish the price for the option execution and the price of the option itself (premium).
When a contract price of the option (premium) the buyer of the option always pays the seller as a reward for the right to continue to execute this option. Price is an option as a result of stock market trading.
Price of performance (Strike) is the price at which the option entitles the holder an option to buy or sell futures underlying the option, the price performance are standard and are established by exchange for each option contract.
Thus, the design option includes a choice of one, but two prices. The Bidder first determines the appropriate option to him at the cost of execution, and then in the bidding process is determined by the price of the option (premium).
Option strategies can be used in any situation in the market and any predictions as to make market participants. There are many strategies for the use of stock options – both for hedging or speculation.
