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Derivative Engines - Options Handbook
Introduction
Definition
Call / Put
Strike Price
Volatility
Implied Volatility
Pricing Options
Greeks
Delta Hedging
Volatility Trading
Currency Options
Moneyness
Strike vs Volatility
25 Delta BF & RR
Volatility Matrix
Option Types
Vanilla Options
Barrier Options
Knock In
Knock Out
Double Knock In
Double Knock Out
Knock In - Knock Out
Window Barrier Options
Binary Options
One Touch
No Touch
Double No Touch
Double One Touch
European Digital
European Digital Range
Range Accrual Options
DEFINITION
An Option is a contract to buy or sell an underlying asset between two parties. The counterparties of the option contract is 'the option buyer (holder)' and 'the option seller'. The option holder buys the right to 'buy' or 'sell' the underlying asset by a certain date for a certain price.
A call option gives the holder to buy the underlying asset and a put option gives the holder to sell the underlying.
CALL / PUT
If the options gives to its holder the right to buy an asset then that option is a “CALL” option. If the option gives to its holder the right to sell an asset then that option is a “PUT” option.
OPTION PARAMETERS
The price in the contract is known as the
strike price
, the date is known as the expiry date or maturity. If the option is exercised, then the date that the transaction will be realized is known as the delivery date. While American options can be exercised at any time up to expiry, European options can be exercised only on the expiration date.
The tenor, strike price and the option’s type (CALL or PUT) are the required input parameters to calculate the premium.
PREMIUM
Premium is also known as the
price
or value of an option. The option buyers should pay the option seller a premium against the right that he received.
Moneyness
,
Volatility
and Time to Expiry affects the premium of an option.
Derivative Engines is a Real Time option calculator. Please see the online option pricers below.
Options
Structured Products
Vanilla Options
Dual Currency Deposit
Multiple Options Portfolio
Asymetric Forward
Knock In Barrier Options
Zero Cost Collar
Knock Out Barrier Options
Seagull (3 Way Collar)