As we covered in lecture 2.2, an option has 5 main parameters:
- The underlying asset
- The option type
- The expiry date
- The strike price
- The option price
In Course 3 we will be focusing specifically on the call option type. A call option gives the option buyer the right to buy the underlying asset, at the strike price, on the expiry date. As a call option is the right to buy the asset, we will also look at how buying a call option compares to buying the asset itself.
The buyer of a call option is purchasing the right to buy the underlying asset, at the strike price, on the expiry date. On the other side of the trade, the seller of the call option has an obligation to sell the underlying asset to the option buyer, should the option buyer choose to exercise their right.
In Course 3 we will stick to call options in traditional markets, using examples where everything is denominated in US dollars. Then in Course 4, we will move on to cryptocurrency call options. This will allow you to first learn the basic mechanics of call options without the added complexity that cryptocurrencies and inverse contracts bring.
So, let’s begin in the next lecture with a simple example of how a company might use a call option.