What is Option?
Option contracts are contracts that offer the party who has taken the option the opportunity to buy or sell the product, value or financial asset of a price, amount and quality determined in a certain term or until a certain term. If the buyer uses his right from this contract, it is the contracts that create a liability to buy or sell the property, asset or financial asset.
The investor who gets the option retains the right to use the option in exchange for a certain premium.
The investor who sells the option, on the other hand, should provide the option obligations at the request of the buyer.
What Do Terms Mean?
Usage Price: It is the purchase-sale fee of the contracted goods, value or future date determined within the scope of the financial indicator.
Option Premium: The amount given within the scope of the right to buy and sell.
Purchase (Call) Option: It gives the purchaser the right to receive a certain amount of property, value or financial indicator from a certain usage fee until or to a certain term.
Selling (Put) Option: It gives the purchaser the right to sell a certain consistent good, value, financial indicator at a certain price until or to a certain term.
American type options: It can be used by the option buyer at a desired date before the due date.
European type options: They can be used only when due.
Initial Margin: It is decided by using as collateral within the scope of SPAN portfolio.
Sustainability Guarantee: It constitutes 75% of the guarantee required.
What is the Advantage?
- With low investments, they can earn well above the profits that can be earned in the main markets.
- They can give the opportunity to invest with more favorable collateral conditions.
- Although it is at the same risk level, it offers the opportunity to create portfolios that generate more profit.
- It provides protection to investors for unexpected price fluctuations.
- It provides protection against changes that may occur in other properties of financial assets and may affect the price negatively.
- Options can be used to reduce the risks that occur in short selling strategies.
What are the Risks?
- Investors who take the risk of price changes in order to increase the yield in futures contracts may suffer high level losses due to leverage effect.
- Due to the high-risk positions taken in order to increase the yield, the amount of loss to occur will lead to loss of collateral and may lead to the suspension of transactions.
How to Use Options?
In the expectation of an increase in prices, the purchase option is taken or the sale option is put up for sale.
In anticipation of a decline in prices, the put option is taken or the put option is put up for sale.
While the premium debts are taken from the account of the person with a long position on the day of T (the day of the transaction), the premium will be credited to the account of the person holding the short position at T + 1.
While no collateral is required for the option area, initial collateral is required under the SPAN parameter for the option seller.
Use of Options at the Termination
In physical delivery option contracts, no transactions are made from long positions that do not have any instructions for use at the end of maturity, positions are completed without any compromise. Swap time takes place as T + 3.
In cash-settled option contracts, the positions in cash-settled option contracts in the profit at the end of maturity are automatically used and the account revision is carried out over the usage profit / loss amounts, without giving any usage instructions to Takasbank.