Derivatives, Futures & Options
7 terms
Open Interest
Derivatives, Futures & Options
shares
The total number of derivative contracts that remain open and have not been closed or settled.
Open Interest rises when a new buyer and a new seller create a contract, and falls when both sides close
Option
Derivatives, Futures & Options
qualitative
A contract giving its buyer the right, but not the obligation, to buy or sell an underlying at a set price by a set date.
Test: the holder may exercise or let the contract lapse; the writer must perform if the holder exercises
Option Chain
Derivatives, Futures & Options
qualitative
A table listing all available strikes for an underlying and expiry, with prices, volumes and open interest for calls and puts.
Test: the display lists every listed strike for one expiry, with call data on one side and put data on the other
Option Intrinsic Value
Derivatives, Futures & Options
₹
The value an option would have if exercised immediately, which is never less than zero.
Call Intrinsic Value = max(Spot - Strike, 0); Put Intrinsic Value = max(Strike - Spot, 0)
Option Premium
Derivatives, Futures & Options
₹
The price paid by an option's buyer to its writer for the rights the contract confers.
Premium = Intrinsic Value + Time Value; Total Cost = Premium x Lot Size
Option Writer
Derivatives, Futures & Options
qualitative
The party that sells an option and takes on the obligation to perform if the holder exercises.
Test: the party received the premium at inception and must deliver or take delivery at the strike if assigned
Out of the Money
Derivatives, Futures & Options
qualitative
An option that would have no value if exercised immediately.
Call: Spot < Strike; Put: Spot > Strike