Option (from Lat. Optio) - a contract, but not an obligation to buy or sell an asset (commodity or security) at a certain price and within a certain period of time. This financial instrument is called a derivative (or derivative), because its value depends on the value of another financial instrument (stock, bond, commodity, etc.).
An option is a financial instrument, the use of which for profit is effective both for large organizations and banks, and for private players on the stock exchange. The owner of an option is called an investor, it is a person or a company that has the right to sell or buy the object of the transaction (asset). An option is a derivative financial instrument, its use is more difficult than trading stocks, because it is necessary not only to predict where the price will go, but also to determine the moment or a limited period of time at which a certain price level will be reached, at which a deal should be closed. (to buy an asset) and a put option (to sell). Options trading occurs in two stages: buying an option (opening a trading position), exercising an option (closing a position). There are exchange and OTC options. Exchange-traded options are standard contracts concluded according to an established specification: the exchange determines the standards and conditions, and exchange players agree only on the value of the option premium (the amount of money that the buyer pays to the seller). The conditions for concluding OTC options are arbitrary and are negotiated at the stage of discussion between the participants (for example, other dates or intervals of expiration of the contract). OTC contracts are not welcomed by the exchange and are used mainly by large investment companies to hedge (open two opposite transactions in different markets to compensate for price risks) open positions. One of the varieties of such options are transactions in the Forex market, where companies hedge the risks of changes in currency rates. The OTC options market is more flexible, it allows you to change the amount of remuneration in the direction of decreasing or increasing, i.e. to bargain. Non-standard options are also called exotic, especially common schemes have got their own names, for example, Asian option, binary option, swaption. There are two styles of options implementation - American (redemption can occur any day before the expiration of the contract) and European (redemption occurs strictly on the agreed day)
