Introduction to Options by Peter Findley and Sreesha Vaman

Introduction to Options by Peter Findley and Sreesha Vaman

What Is An Option?
• One contract is the right to buy or sell 100 
shares
• The price of the option depends on the price 
of the underlying, plus a risk premium
• It is an option, it is not a binding contract
• Call Option: Right to buy a share
• Put Option: Right to sell a share
• Options traded the same as stocks

What Makes Up An Option?
• The strike price is the price at which you can buy 
or sell shares
• Expiration date is the last day you can exercise an 
option
– Automatically executed on this day
• Underlying asset is the stock on which the option 
is written
• Price of the option is how much investor pays for 
the right to buy or sell (a.k.a. premium)
• Options can be either “American” or “European”
– American-style options can be executed on any day
– European-style options can be executed only on the 
expiration date

Introduction to Options by Peter Findley and Sreesha Vaman