
In options trading, an option refers to a contractual agreement that gives the owner, the purchaser, the right, yet not the duty, to purchase or sell an underlying instrument or commodity at a certain strike price as soon as or within a certain period of time, according to the type of the agreement. The owner can either choose to exercise it or to let it expire. This article is about the various types of options available in the market today. There are two categories of options, namely, calls and puts. Among these, puts are more popular because of their high volatility.
Calls for sale give the buyer the right to purchase an underlying instrument or commodity at the strike price before the expiry date. Calls have higher premiums than puts. It means that the risks of trading calls are less than that of trading puts. The other important concept that …