The world of business in the stock market is not limited to Spot or point transactions. The fluctuating nature of this market has created an opportunity to deal with forecasts, which is called pumpkin transactions or transaction authority. A relatively complex market that is suitable for investor risk from beginner to professional, and can also be a source of more income. The following is a review of the mechanism of options, its types and the concepts related to this financial instrument.
What is Option Transactions?
The Options Trading market is one of the types of derivative markets in which parties agree to buy and sell a set of assets to a specific future at a given price. The details of the agreement between them are provided in the form of a contract called the Options Contract. In fact, what is traded by the parties is this contract. It is also called basic assets.
The important point is that in the optional transactions, the parties have the right to buy or sell basic assets but have no obligation to do so. In other words, if the price of the basic asset and as a result of the value of the contract moves contrary to their predictions, it is possible to close the position for each party. Optional transactions not only on the stock exchange, but in other financial markets from goods and forex to Digital currency They are also used.
Types of Transaction Opinion
In general, in the optional market, two types of contracts are traded below:
· Call Option Contract, which gives the buyer a certain amount of basic asset at a given price to the predetermined date.
· The PUT OPTIONS, which gives the buyer a certain amount of basic asset at a specified price to the predetermined date.
It is clear that buying a purchase option is reasonable when the trader expects prices to rise. On the contrary, if you expect a reduction in basic asset prices, buying a sales authority can be a good decision. Accordingly, there are generally four types of transactions in this market:
· Purchase of purchase authority or Long Call
· Purchase of sales ownership or Long Put
· Selling a purchase or Short Call
· Selling the Sale or Short Put
The most important concepts of optional contracts
Before starting your business market, you need to be well trained and know its basic concepts. In addition to the basic asset we get to know, the most important of these concepts are described below.
Contract maturity
The maturity of the contract is said to be a date that the parties agree to keep the contract open until then. They will be able to execute their powers, whether selling or buying. Of course, depending on the details of the contract, its implementation may be limited to the due date.
Guarantee
The seller is obliged to pay the stock exchange to the stock market under the heading of his obligations. This amount is usually 5 % of the value of the contract on its first trading day. It is used to pay the buyer’s possible profit at the end of each trading day. By reducing this budget, there is usually a warning to the seller to recharge it.
Premium Price and Price of Applications
At the price the buyer pays at the time of the option of the option, the Premium Price is called the Insurance Price. The agreed price for the purchase or sale of base assets is also called the Strike Price.
What are the benefits and applications of option trading?
Dealing contracts are one of the most sophisticated financial instruments. However, operating in this market and examining it has many benefits, the most important of which is discussed below.
A tool for risk management
The lack of a commitment to the option transactions has made it a suitable option for risk coverage. In fact, stock market traders can minimize the damage caused by unpredictable price orientations by adopting the optional options. For example, if investor purchases are damaged in the Spot Market due to lower prices, the profit from his sales positions in the option market can at least somewhat compensated for this loss.
A tool for market prediction
What traders and analysts use data -related data market data to predict their desired asset price and the overall status of the stock market in the future. Naturally, if the ratio of purchasing contracts to sales increases, it can be concluded that the market, and especially the more professional activists, hope to raise prices. Since some details of these contracts are clear to the public, the price fluctuations of actions and premiums can also be achieved.
Analysis of some options market data analysis requires more expertise. For example, the values of the contract guarantees can be mentioned. The more sellers are willing to pay the funds, the more secure they are of their predictions.
Make money with low capital
More professional traders use oscillating procedures not only for risk coverage, but also for passive income. These contracts actually have the opportunity to make a profit equal to the lower -budget spot markets. The advantage created by the nature of the prediction of these tools allows the purchase of assets at a lower price than the Spot market. On the other hand, the purpose of the seller is to cover its risks in the Spot Market. Therefore, they usually set the price of the premium below the asset price in the Spot market and do not suffer loss, given their loss limit in the Spot Market.
Option Transaction Mechanism in Tehran Stock Exchange
Optional transactions in each of the world’s derivative markets have their own steps and standards. In the Tehran Stock Exchange, these transactions are monitored by the Central Securities and Settlement Company through the Constant Room. This room performs the necessary calculations and executes the contracts.
Such as the usual trading trading, to buy and sell all kinds of contracts of transaction. Stock Exchange code Have and sign up in a valid brokerage. These transactions are made in the stock market in the form of contracts called standard contracts. In which the prices of execution and expiration date are determined by the sustainable room. But in the Forex market, the parties have more authority to determine the details of the option contracts with greater risk.
Doing Option Transactions on Tehran Stock Exchange It is also done through brokerage systems. Your settlement can also be cash or physical. In physical settlement, the basic asset principle is transferred from the seller to the buyer’s portfolio. But in the cash settlement, the price difference between the applied and the asset price in the market will be paid to the buyer at the time of the contract.
The last word; Easy and Complete instrumental transaction
Option transactions look complex at first glance for professional traders. This is somewhat true, but many beginner traders use this tool with the help of their brokers and consultants. Low risk, the possibility of making more profits with lower capital and risk coverage performance are the most important benefits of these tools for traders at all levels. A professional stock exchange consultant can help you enter the market step by step.
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