Skip to content

Types of Options

By Underlying Asset:

  1. Equity Options: Options on individual stocks.
  2. Index Options: Options on stock indices.
  3. Commodity Options: Options on physical goods like gold or oil.
  4. Currency Options: Options on foreign exchange rates.
  5. Interest Rate Options: Options on interest rate instruments.

By Type:

  1. Call Options: Provide the holder the right to buy the underlying asset at the strike price before or on the expiration date.
  2. Put Options: Provide the holder the right to sell the underlying asset at the strike price before or on the expiration date.

By Style:

  1. American Options: Can be exercised at any time up to and including the expiration date.
  2. European Options: Can only be exercised on the expiration date.
  3. Bermudan Options: Can be exercised on specific dates prior to expiration.

By Settlement:

  1. Physical Settlement: Involves the actual delivery of the underlying asset upon exercise.
  2. Cash Settlement: Involves a cash payment reflecting the difference between the market price and the strike price upon exercise.