Definition for : Option

An option is a contract between two parties, under which one party gives the other party the right (but not the obligation) to buy from it (a Call option) or to sell to it (a Put option) an Underlying asset at a predetermined price (see Strike price), in exchange for the payment of a Premium. Options can be In the money, At the money, and Out of the money (see these terms).

(See Chapter 24 Hybrid securities of the Vernimmen)

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