For example: A trader in October 2016 agrees to deliver 10 tons of steel for INR 30,000 per ton in January 2017 which is currently trading at INR 29,000 per ton.  In this case, trade is assured because he got a buyer at an acceptable price and a buyer because knowing the cost of steel in advance reduces uncertainty in planning. In this case, if the actual price in January 2017 is INR 35,000 per ton, the buyer would be benefitted by INR 5,000 (INR 35000-INR 30,000). On the other hand, if the price of steel becomes INR 26,000 per ton then the trader would be benefitted by INR 4,000 (INR 30,000- INR 26000)

Options are powerful because they can enhance an individual’s portfolio. They do this through added income, protection, and even leverage. Depending on the situation, there is usually an option scenario appropriate for an investor’s goal. A popular example would be using options as an effective hedge against a declining stock market to limit downside losses. Options can also be used to generate recurring income. Additionally, they are often used for speculative purposes such as wagering on the direction of a stock.
If a company locks in the price and the price increases, the manufacturer would have a profit on the commodity hedge. The profit from the hedge would offset the increased cost of purchasing the product. Also, the company could take delivery of the product or offset the futures contract pocketing the profit from the net difference between the purchase price and the sale price of the futures contracts.
If you are buying an option that is already "in the money" (meaning the option will immediately be in profit), its premium will have an extra cost because you can sell it immediately for a profit. On the other hand, if you have an option that is "at the money," the option is equal to the current stock price. And, as you may have guessed, an option that is "out of the money" is one that won't have additional value because it is currently not in profit.
Download is a free tool available to Site Members. This tool will download a .csv file for the View being displayed. For dynamically-generated tables (such as a Stock or ETF Screener) where you see more than 1000 rows of data, the download will be limited to only the first 1000 records on the table. For other static pages (such as the Russell 3000 Components list) all rows will be downloaded.
Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss. While the data Ally Invest uses from third parties is believed to be reliable, Ally Invest cannot ensure the accuracy or completeness of data provided by clients or third parties.
There are two types of commodity options, a call option and a put option. Understanding what each of these is and how they work will help you determine when and how to use them. The buyer of a commodity option pays a premium (payment) to the seller of the option for the right, not the obligation, to take delivery of the underlying commodity futures contract (exercise). This financial value is treated as an asset, although eroding, to the option buyer and a liability to the seller.

A bull call spread, or bull call vertical spread, is created by buying a call and simultaneously selling another call with a higher strike price and the same expiration. The spread is profitable if the underlying asset increases in price, but the upside is limited due to the short call strike. The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one. Similarly, a bear put spread, or bear put vertical spread, involves buying a put and selling a second put with a lower strike and the same expiration. If you buy and sell options with different expirations, it is known as a calendar spread or time spread.


You also can limit your exposure to risk on stock positions you already have. Let’s say you own stock in a company but are worried about short-term volatility wiping out your investment gains. To hedge against losses, you can buy a “put” option that gives you the right to sell a particular number of shares at a predetermined price. If the share price does indeed tank, the option limits your losses, and the gains from selling help offset some of the financial hurt.
Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. All securities involve risk and may result in loss. While the data Ally Invest uses from third parties is believed to be reliable, Ally Invest cannot ensure the accuracy or completeness of data provided by clients or third parties.

When buying or selling options, the investor or trader has the right to exercise that option at any point up until the expiration date - so simply buying or selling an option doesn't mean you actually have to exercise it at the buy/sell point. Because of this system, options are considered derivative securities - which means their price is derived from something else (in this case, from the value of assets like the market, securities or other underlying instruments). For this reason, options are often considered less risky than stocks (if used correctly). 
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