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Considered the financial markets as a cornerstone of global economic activity because of the availability of services to help promote it to the highest levels of sophistication and prosperity To achieve this, it shall provide the necessary tools to help them in that is the stock and bond more tools widespread and commonly used in this area .
However, with developments and changes experienced by the global economy in light of financial globalization has made the stock and bond traditional instruments do not meet the requirements of the economic life of this began to think about the creation of tools and means of modern place and complement the shortcomings of stocks and bonds in particular with regard to the risks which may be incurred in the future and thus invented development of financial derivatives known as among these derivatives option contracts which is the subject of this research and we will bring this problem the following :
What option contracts ? What are the mechanisms and strategies to deal with this contract ?
The first topic: what option contracts
Spread the use of options on the widely held in recent years more than a million options held daily in large stock exchange
The first requirement : the emergence of the concept of option contracts
Growing [1] : The commodities market based on the emergence of option contracts as it aims producers to protect themselves from the risk of an abundance of production and declining prices Instead, they resort to buy a put option to be able to sell their produce to the trader versus reward paid by the product of the dealer, on the other hand wants traders to protect themselves from higher prices Instead, they resort to buy purchase option to be able to buy goods at a specified price in exchange for paying a bonus to producers.
With the passage of time has increased the spread of the use of option contracts and the development of securities markets where established the so-called option markets were trading option contracts for the first time, shares of the Stock Exchange Organization suffered in 1973 and now is trading these options in many stock exchanges around the world , most notably the Chicago Mercantile Exchange in the United States .
And option contracts can be defined : as the implementation of contracts concluded for future operations as it allows a party to purchase or sell an asset be the subject of the contract and the fact that these contracts for a specified period . With regard to the choices of Finance , it does not depart from the same basic idea of these rights and the fundamental difference is that the thing placement deal is stocks, bonds, foreign currencies , and represents the option contracts [2] One of investment tools of modern that gives the investor an opportunity to reduce the risk to the private change risks stock prices , which wants to sell or buy Guy future, peer certain amount is non-refundable pay to the second party as compensation or reward is called the price of the option.
The second requirement : the pillars of option contracts . [3 ]
Option contracts consist of the following pillars :
- The right buyer : is the person who buys the right option , whether right or option to buy the right choice and the right to sell at a specified price in the implementation of the so-called strike price or exercise price until a certain date and called on the final implementation .
- Editor right : is the person who is editing the right buyer for the right match bonus earned by the buyer of the option called priceless .
- Execution price (or exercise price ) is the price of the underlying time of conclusion of the contract and is typically the current price in the market or close to it .
- P : is the price of the asset at the date of the end of the agreement or practice .
- Date of the contract : it is the first day of the entry into force of the agreement.
- Implementation date : The date in which the buyer the right implementation.
- Bonus: is the amount paid by the buyer of the option the right editor decade as compensation for the risks they might be exposed to where this bonus are not refundable .
Third requirement : types of option contracts
Option contracts can be divided into :
1 – The main types : [4]
1-1 ) purchase option : it is a contract that allows an investor the right but not the obligation to buy an asset at a price of the contract will be the subject of a specific date and peer- bonus paid by the editor resort where the investor to buy Instant Profit App this kind of option when the expected rise in stock prices in the market.
1-2 ) put option : is it an option that gives the holder the right to sell an asset at a price and a specific date in advance , an option that is not binding to the bearer has its implementation or non-implementation according to the evolution of rabies in the market and seek an investor to buy this kind of option when the expected decline in stock prices.
2 – species by the implementation date : 2
2-1) held the option to U.S. : is the right choice ( buy / sell ) and the exercise of this right or be executed at any time during the period between the conclusion of the contract and the expiry date .
2-2) held a European option : it is the right choice ( buy / sell ) is to be implemented in time for the end of the decade.
3 – by types of coverage:
3-1 ) option contract is covered : he has held the editor decade assets that are the subject of the contract.
3-2 ) held the option is not covered : is the right choice ( buy / sell ) is not the editor of the contract owner of the asset that is contracted it.
The second topic: coping mechanisms option contracts
Numerous exchanges leading choices , compete with each other where Buyers issued instructions to buy or sell Smaserthm time what they want and at a price determined by the Instant Profit App forces of supply and demand and further clarification take all of the options of buying and selling on the end .