Oil Option

Minimum risk thanks to the agreed price.

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Product features

Options give the buyer the right but not the obligation to buy or sell an asset (underlying) on a future date at a pre-set price (strike price). A fee (premium) is generally paid upfront for this flexibility. There are two types of options:

Call: it grants the buyer the right to buy the underlying asset at a predetermined price. It can be exercised when the market prices are higher than the predetermined price.

Put: it grants the buyer the right to sell the underlying asset at a predetermined price. It can be exercised when the market prices are lower than the predetermined price.

The risk for the buyer is exclusively the premium paid.

Cost efficiency
The exposure of a physical position can be replicated in exchange for a premium.
Flexibility
Options that can be used in many ways to create customized positions and cover risks.
Risk reduction (for the buyer)
No exposure to adverse price movements: the premium constitutes the maximum loss.

 

Graphic illustration

The graph shows the value at expiration of option contracts. This value (y axis) is obtained through the possible exercise of the option. For example, in the case of the purchase of a call, the value of the contract at expiration will be higher when the difference between the value of the unerlying and the strike is bigger. If at expiration the value of the underlying is lower than the strike, the value of the contract will be zero because the option is not excercised.

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