- Published on
KembaraXtra – Islamic Derivatives: Call Option & Put Option Using Goods (Simple Scenarios)
🔹 Call Option (Goods Example)
👉 A call option gives the right to buy goods at a fixed price.
🔸 Scenario (Using Wheat 🌾)
👉 If market price rises to $130:
👉 If market price falls to $90:
🔹 Put Option (Goods Example)
👉 A put option gives the right to sell goods at a fixed price.
🔸 Scenario (Using Rice 🍚)
👉 If market price falls to $70:
👉 If market price rises to $120:
🔹 Key Idea
🔹 Simple Summary
🔹 Call Option (Goods Example)
👉 A call option gives the right to buy goods at a fixed price.
🔸 Scenario (Using Wheat 🌾)
- You pay a premium of $5
- You get the right to buy 100 kg of wheat at $100 (strike price) in 1 month
👉 If market price rises to $130:
- You buy wheat at $100
- Market value = $130
- Profit = $30 − $5 = $25 ✅
👉 If market price falls to $90:
- You don’t use the option
- Loss = $5 (premium) ❌
🔹 Put Option (Goods Example)
👉 A put option gives the right to sell goods at a fixed price.
🔸 Scenario (Using Rice 🍚)
- You pay a premium of $5
- You get the right to sell 100 kg of rice at $100 (strike price) in 1 month
👉 If market price falls to $70:
- You buy rice at $70
- Sell at $100
- Profit = $30 − $5 = $25 ✅
👉 If market price rises to $120:
- You don’t use the option
- Loss = $5 (premium) ❌
🔹 Key Idea
- Call option (goods) → Profit when price goes up 📈
- Put option (goods) → Profit when price goes down 📉
- Premium = small cost for flexibility
🔹 Simple Summary
- Call → Right to buy goods cheaper later
- Put → Right to sell goods higher later
- If not profitable → you only lose the premium
0 Comments