Introduction

Stock options’buyer and seller

Investors can choose LONG (buy) or SHORT (sell) stock options.

  • Buyers (holders)--have rights but no obligation to exercise on or before the expiration date.
  • Sellers (writers)--are obliged to honour the contracts if the holders choose to exercise.

Types of Options:

There are two types of stock options:

Call Option

Long Call      Short Call

Example: Stock A (October) at $90 strike price
Holder has rights to buy the stock at $90 (strike price) on or before October Expect rising of stock price
Writer is obliged to sell the stock at $90 if the holder exercises the contract Expect not rising of stock price

Long Put      Short Put

Example: Stock B (October) at $20 strike price
Holder has rights to sell the stock at $20 (strike price) on or before October Expect falling of stock price
Writer is obliged to buy the stock at $20 if the holder exercises the contract Expect not falling of stock price

Stock option is a contract entered by and shared between two parties, a buyer and a seller. Everyone can long (buy) or short (sell) the contract. The buyer has the right, but not the obligation, to buy or sell the underlying asset at predetermined price on or by a predetermined expiry date. On the other hand, the seller has the obligation to buy or sell the underlying asset at predetermined price on or by a predetermined expiry date if the buyer exercises the contract. When you long an option, the purchase price is called the premium. If you short, you receive the premium.

Characteristics of Stock Options

1. Flexible investment strategy

Stock options can assist investors to make profits in bullish, bearish or stagnant markets.

2. Hedging with options

Investors can restrict the downside while enjoying the full upside by hedging the underlying assets with options.

3. Leverage the return

Stock option is derivative, which leverages the investment return.

Low Transaction Fee

The transaction fee for stock option is cheaper than that for the same amount of stocks. Besides, stamp duty is exempted for stock option.

Top of Page
Contact Us
Please contact your account executive or call us now.
Stock Options Department
Tel : (852) 2277 6622
Email : option@phillip.com.hk

Enquiry & Support
Branches
The Complaint Procedures
E-Check
Login
Louis Talk
Investor Notes
Free Subscribe
Contact Us