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KembaraXtra – Islamic Derivatives: Definition of an Option
🔹 Definition
An option is a financial contract that gives the buyer the right (but not the obligation) to:
a specific asset at a fixed price (strike price) within a specified time period, in exchange for a premium paid to the seller.
🔹 Key Elements
🔹 Simple Summary
👉 Option = right to buy or sell later at a fixed price, with a cost (premium)
🔹 Definition
An option is a financial contract that gives the buyer the right (but not the obligation) to:
- Buy (call option), or
- Sell (put option)
a specific asset at a fixed price (strike price) within a specified time period, in exchange for a premium paid to the seller.
🔹 Key Elements
- Right, not obligation
- Strike price → fixed agreed price
- Premium → cost of the option
- Time period → must be exercised before expiry
🔹 Simple Summary
👉 Option = right to buy or sell later at a fixed price, with a cost (premium)
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