Stock options in trading service Essay

Project Title Stock Options Trading Service
Category Finance
Introduction A stock option in trading service is the right, but not the compulsion to buy or sell something on a particular date at a particular price. In the stock market, an option is a contract between two parties to buy or sell particular number of shares at a later date for an decided price. Three parties are invoiced in the stock option trading service, the option seller, buyer and the broker.
1. The option writer or a seller is a person who grants somebody else the option to buy or sell. He obtains a premium on its price.
2. The option writer receives a price from option buyer for execution of option.
3. The stock broker acts as an agent to find the option seller and buyer, and receives a fee or commission for it.
There are mainly two types of stock options trading service namely call option and put options. Let us see each option in detail
Call Options A call option is a contract giving the right to own the shares. The call option that gives the right to buy in its contract gives the particulars as follows
Company name whose shares are to be bought
Shares to be purchased
The exercise price or purchase price or the strike price of the shares to be bought
The expiration date, the date on which the contract or the option exercise
Put Options Put option gives its owner the right to sell (or put) an asset or security to someone else. It is an option not an obligation. Like the call option, put option contract contains
Company name whose shares to be sold
The number of shares to be sold
The striking price or selling price
The expiration date of the option
Stock Options trade services can be categorised further on the basis of method in which they are going to be traded
1. American Style Stock Option It works on the basis of time between the date of purchase and the date of expiry. Only the owner of the contract can close the option before the expiry of date.
2. European Style Stock Option European style works differently from American Style, as European style is not much flexible for the owner of contracts. They need to work on the basis of underlying assets expiration date only.
Difference between American style stock option and European Style stock option is not so much but only the geographical area difference.
Summary
In the end of the article we can have a quick recap that the main stock options trade service are only two i.e. call and put option. But as we have explained above American and European Stock option trade services are also in consideration, main difference is only geographical. There are some other options also their like Exotic Option, Cash selected option, over the counter option, but these are not completely involve in stock option trade services.