In this article, we will study the concept and then outline some factors to consider when calculating the strike price. - by sarathcp92 stockoptions personalfinance
The derivative market is replete with many instruments, ranging fromto futures, swaps, and many more. With an option, one has the right to buy or sell a security at a specified price on or before expiration. The strike price of an option is the price at which the option can be bought or sold when it is exercised. It is a key factor in determining the cost of an option, and this is one of the primary determinants of whether an option can be profitable.
You might be wondering how to calculate the strike price, what things to consider when calculating the strike price and how to choose the right strike price. Well, in this article, we will study the concept and then outline some factors to consider when calculating the strike price. Read on!An option is a contract that gives the holder a right, but not the obligation, to buy or sell a particular security at a pre-established price during or on expiration.
Otherwise, the contract will be invalid; hence, there will be no obligation to buy or sell at this price. The strike price of an option is the price at which an investor can exercise his/her right to buy or sell a security, and the contract will be exercised automatically at this price.A stock option is a derivative security that gives the trader the right to purchase or sell the underlying asset at a specific price with a particular expiry date.
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