European put call options pricing


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Summary of SET50 Index Options Contract Specification - TFEX

The profit or loss on these positions for different TCKR stock prices is graphed below. Notice that if you add the profit or loss on the long call to that of the short put, you make or lose exactly what you would have if you had simply signed a forward contract for TCKR stock at $65, expiring in one year. If shares are going for less than $65, you lose money. If they are going for more, you gain. Again, this scenario ignores all transaction fees.

Put-Call Parity - Investopedia

Mr. Gupta bought 7555-RELIANCE-CALL option contract. The stock is currently trading at Rs. 8555. If Mr. Gupta decides to &lsquo exercise&rsquo his right he will get the stocks at the rate of 7555 even though the stock is being traded at 8555.

-Binary Risk Analysis & Options Trading

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That&rsquo s not correct. An option writer can close the SELL option transaction if he/she wants by squaring off. Owner/Buyer of the option need not worry about the opposite party as there will always be equal number of buyers and sellers available all the time for a given contract.


Options contract gives the buyer the right, but not the obligation to buy (or sell) the underlying asset (stock, Index etc) at a specified price at any time during the life of the contract
On the other hand futures contract gives the buyer the obligation to buy underlying asset (index, stock etc) at a specified price at any time during the life of the contract

Exercise price
The price at which the option holder may buy or sell the underlying security, as defined in the terms of his option contract. It is the price at which the call holder may exercise to buy the underlying security or the put holder may exercise to sell the underlying security. For listed options, the exercise price is the same as the Striking Price. See also Exercise.

Divisor
A mathematical quantity used to compute an index. It is initially an arbitrary number that reduces the index value to a small, workable number. Thereafter, the divisor is adjusted for stock splits (price-weighted index) or additional issues of stock (capitalization-weighted index).

In this hypothetical market, TCKR puts should be trading at a $ premium to their corresponding calls. This makes intuitive sense: with TCKR trading at just 67% of the strike price, the bullish call seems to have the longer odds. Let's say this is not the case, though: for whatever reason, the puts are trading at $67, the calls at $7.

Discretion
Freedom given to the floor broker by an investor to use his judgment regarding the execution of an order. Discretion can be limited, as in the case of a limit order that gives the floor point from the stated limit price to use his judgment in executing the order. Discretion can also be unlimited, as in the case of a market-not-held order. See Limit Order and Market Not Held Order.



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