Sample Term Paper
To sum up the paper, the paper has examined the practices and practices of option trading. In the exclusive discussion of the paper, it has discussed on major aspect of the historical aspect of the option trading, types of options where it discussed Call options and Put options. Then it has moved to discussing the Parties to the option, pricing of the options and the Option trade Margins that are designed to protect the option traders.
Lastly it has examined possible benefit of trading in option. , however it can not fail to point out that there are dark side of the option trading which is the risks option trading. Therefore, it should be noted that option trading is not suitable for all kind of investors.
Appended documentation
Table1. Parties to call option
| Call Option Taker Characteristics | C all Option Writer Characteristics |
| Pays premium
Right to exercise and buy the shares Trades volatility Profits from price rising Limited losses, potentially unlimited gain Can SELL before expiry to close out |
Receives premium
Obligation to sell shares if exercised Trades time decay Profits from price falling or remaining neutral Potentially unlimited losses, limited gain Can buy back before expiry or before assignment to close out |
Source: John c, and Mark, R. (1998), Option markets: New York, Prentice hall.p.342
Table2. Parties to put option
| Put Option Taker Characteristics | Put Option Writer Characteristics |
| Pays premium
Right to exercise and sell shares Trades volatility Profits from price falling Limited losses, potentially unlimited gain Can SELL before expiry to close out
|
Receives premium
Obligation to buy shares if exercised Trades time decay Profits from price rising or remaining neutral Potentially unlimited losses, limited gain Can buy back before expiry or before assignment to close out |
Source: John c, and Mark, R. (1998), Option markets: New York, Prentice hall.p.341
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