Issuer option in simple words, What is an Option? Put Option and Call Option Explained
Capital Protection Fund Definition: Capital protection-oriented fund is a class of closed-end hybrid fund. The capital protection, however, is not guaranteed in India.
Description: Capital protection-oriented funds are closed-end mutual fund schemes with a portfolio that is skewed towards debt.
Because it is closed-end, fresh units of the scheme will be available for subscription only during the new fund offer NFO period. Subsequent purchase and sale of units is possible only on the exchange platform, where the fund is listed. However, this is easier said than done, as secondary market transaction can often become a Herculean task in the absence of sufficient liquidity. The portfolio comprises of a mix of equity and debt, typically of the nature of a hybrid fund.
However, it is heavily oriented towards debt especially zero coupon debt and only a small part of the portfolio is invested in equity. The maturity of the debt portfolio is aligned with the lock-in period of the fund, thereby insulating it from the gyrations of interest rate movements.
As debt instruments are held till maturity, the probability of marked-to-market losses due to interest rate fluctuations is mitigated. The capital protection orientation of the fund means that the debt component will be managed in such a manner that the returns from it increase to the level of initial capital invested. At the same time, the equity portion of the portfolio is managed with the aim to provide a fillip to the overall portfolio value.
Put Options and Call Options
For instance, if the minimum debt exposure is fixed at 80 per cent, then this is managed to generate per cent of the principal invested. The remaining 20 per cent comprising equity is managed to generate an upside to the portfolio. The portfolio is normally invested issuer option in simple words highest grade debt instruments. These funds provide superior downside risk protection during a market downturn but offer limited upside during market upturns.
Definition of 'Call Option'
They are suitable for conservative investors with a low risk appetite. These funds provide even the most conservative investors an opportunity to invest a small part of their portfolio in equity, thereby giving them the scope to participate in equity market upturns. The buyer of the call option earns a right it is not an obligation to exercise his option to buy a particular asset from the call option seller for a stipulated period of time.
Description: Once the buyer exercises his option before the expiration datethe seller has no other choice than to sell the asset at the strike price at which it was originally agreed. The buyer expects the price to increase and thus earns capital profits.
Butterfly Spread Option Definition: Butterfly Spread Option, also called butterfly option, is a neutral option strategy that has limited risk. The option strategy involves a combination of various bull spreads and bear spreads.
A holder combines four option contracts having the same expiry date at three strike price points, which can create a perfect range of prices and make some profit for the holder.
- Buy bitcoin cash
- Copy Examples of Issuer's Option in a sentence AllNotes in respect of which any such notice is given shall be redeemed, or the Issuer's Option exercised in respect thereof, on the dates specified in such notice in accordance with this Condition.
- Option (finance) - Wikipedia
- Issuer's Option | legal definition of Issuer's Option by Law Insider
- The strike price may be set by reference to the spot price market price of the underlying security or commodity on the day an option is taken out, or it may be fixed at a discount or at a premium.
- Binary options course
A trader buys two option contracts — one at a higher strike price and one at a lower strike price and sells two option contracts at a strike price in between, wherein the difference between the high and low strike prices is equal to the middle strike price. Both Calls and Puts can be used for a butterfly spread. That allows the trader to earn a certain amount of profit with limited risk.
In this strategy, either you go for Calls or Puts or a combination of both. In the same way, you either go long or short on options or a combination of issuer option in simple words and shorts depending on what you are foreseeing in future and what is your payoff strategy.
Example: Suppose, a trader is expecting some bullishness in Reliance Industries, when it trades at Rs 1, Now, a trader enters a long butterfly bull spread option by buying one lot each of December expiry Call options at strike prices Rs and Rs 1, at values of The cost to the trader at this point would be 3.
If the strategy fails, this will be the maximum possible loss for the trader.
If the Reliance Industries stock trades at the same level i. Rs 1, on the expiry date in December end, the Call option at the higher strike price will expire worthless as out-of-the-money strike price is more than the trading pricewhile the Call option at the lower strike price will be in-the-money strike price is less than trading price and the two at-the-money Call options that had been sold expired worthless.
Now subtracting the initial cost of Rs 3.
Bond Option Definition
But if the trader decides to exit this strategy before expiry, say, when the Reliance Industries stock is trading around Rs in cash market, and the Call options are trading at 40 Rs5 Rs and 0. The maximum profitability will be when the cash price is equal to the middle strike price on the expiry day.
The maximum profit will be when the cash price is beyond the range of lower and higher strike prices on the expiry day.