Option Terms that Investors Should Know

Option Terms that Investors Should Know

Undeniably, most investors are more familiar with the stocks ad even the language that is associated with an equity investment. In this case, you really need to have a better and stronger understanding of some of the terms that you might not be familiar with especially for beginners as well as ordinary investors.

  1. The call option.

This option term has the right to purchase around 100 shares of the stock and buy it with a fixed price on it during a fixed period of time as well. It really conveys a right to purchase but it is not an obligation- sort of.

  1. Put Option.

Same with the call option trading. BUT this time, this put option is selling 100 shares of the stock.

  1. Strike Price.

This term is talking about the fixed price by which the investor can either buy or sell the shares covered by the option.

  1. The Option Exercise.

It is a term that usually means that the investors are buying stocks at the strike price thru the call option.

  1. Expiration Date.

This term means that something is no longer to be exercised. It can be other date days, or month or the required limit until the time is over.

  1. Dividend treatment.

This option term don’t pay or even receive dividends that might be occurring on the underlying stock.

  1. Black Scholes model.

This is also being considered as the standard model especially for valuing each option.