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Video not supported! Understanding Option Contract Details Contract details refer to the terms of an option contract.
How an option contract gains or loses value, and therefore creates a benefit to you as the holder of the option, is dependent on key option contract details. Understanding the key contract details is essential to determining how and when an option will meet your financial objectives.
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- Understanding Option Contract Details
Choosing the right options contract for you is dependent on your objectives. For options from maturity, if you want to protect or hedge an asset, you will need to know the contract details to determine the best fit for your portfolio; when speculating, your trading strategy might be influenced by the contract details.
Futures contracts also have an underlying product such as an interest rate, equity index, a foreign currency rate, or some other commodity.
Learn how and when to remove this template message In finance, the expiration date of an option contract represented by Greek letter tau is the last date on which the holder of the option may exercise it according to its terms. In the case of options with "automatic exercise" the net value of the option is credited to the long and debited to the short position holders. Typically, exchange-traded option contracts expire according to a pre-determined calendar. For instance, for U.
This is the last day on which an option can be exercised into the underlying futures contract. After the expiration or maturity date, the option contract will cease to exist; the buyer cannot exercise and the seller has no obligation.
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Strike Price This is the agreed price at which a transaction will happen, if the option is worth exercising. The strike price for the option contract will determine the value at expiration. Option Type Option contracts fall into two categories, call options and put options. Before establishing your option position, you will need to carefully consider your financial strategy and objectives.
Whether you are hedging or pursuing a trading strategy, close alignment of the contract details are important to achieving desired results from your option position.