Financial Derivatives - Options

Options

The purchaser of an Option has rights
(but not obligations) to buy or sell the asset
during a given time for a specified price
(the "Strike" price). An Option to buy is
known as a "Call," and an Option to sell
is called a "Put. "

The seller of a Call Option is obligated to
sell the asset to the party that purchased the
Option. The seller of a Put Option is obligated to
buy the asset.

In a “Covered” Option, the seller
of the Option already owns the asset.
In a “Naked” Option, the seller does not own the asset

Options are traded on organized exchanges and OTC.