option

1. Options
• Option is a contract between two parties in which one party has the
right but not obligation to do something, usually to buy or sell some
underlying asset.
• The right without obligation has some financial value. To realize the
financial values, it is necessary to purchase the derivative instrument
– the rights.

2. Types of Options

3. Call option
• Call option is a contract that grants the holder the
right to buy an asset at a fixed price at during a
particular period of time.
• As a option buyer, if the stock price is lower than the
strike price, the holder would buy the stock at market
price after considering the option premium, instead
of exercising the option.
• The call option buyer anticipate the upward
movement in stock price so that this is a bullish
attitude.
• The difference (+ve) between the market price and
striking price is the reward for option holder

4. Put Option
• Put option gives the put holder the right to sell
the underlying assets at a specified price, within
a specified period of time.
• The writer of the put option promises to buy the
stock.
• The put option holder exercises the option if the
stock price is lower than the exercise price
• The put option holder anticipating downward
movement in the stock price so that this is the
bearish attitude

5. Why less stocks have Options
There are additional risks involved in options, so options
exchanges have put specific requirements in place before a
company's stock can be listed for options contracts
Not all stocks can have options because of certain regulatory
standards. Some of these include:
• Stocks with low prices
• Stocks with low trading volumes
• Stocks with low market caps

6. Why less stocks have Options
1.Liquidity: Options require a certain level of liquidity in the underlying stock for the
options to be traded effectively. If a stock has low trading volume and a small market
capitalization, it may not attract enough traders to create a liquid options market.
2.Volatility: Options prices are affected by the volatility of the underlying stock. If a stock
has low volatility, it may not be attractive to options traders who are looking for price
movements to profit from.
3.Market demand: Options exchanges typically list options on stocks that are in high
demand among traders. These stocks may be large, well-established companies with a
history of steady growth and profitability.
4.Listing requirements: Exchanges may have specific listing requirements for options, such
as a minimum market capitalization or trading volume. If a stock does not meet these
requirements, it may not be eligible for options trading.
• Overall, the decision to list options on a particular stock is driven by market demand and
the ability of the stock to support a liquid and active options market.