The essential difference between call option and put option arises from the fact that one is an option to buy an underlying asset and the other an option to sell the asset.
A future contract is a right and an obligation to buy or to sell an asset. Remember when we talk of types of futures contracts, there are futures across asset classes.
Currency options are a low upfront cost method of participating in the currency derivatives market. Like currency futures, currency options are also available on pairs like the USDINR, EURINR, GBPINR etc.
Commodity options are structured like any other option on an index or stock in that the buyer has limited risk and the seller of the option has unlimited risk.
We know that an option in financial parlance is the right to buy or sell an asset without the obligation. For this right without the obligation, the buyer of the option pays a price which is called the options price or the option premium.
The cost of carry model is based on the premise that the futures price of an asset is the spot price plus the cost of carrying. This cost of carrying is an absolute number but the cost of carrying model presents it in percentage terms.
We all pay option premium when we buy options and receive option premium when we sell options. Have you wondered about the option premium meaning and its significance. Why do options command premium, what exactly this premium and who determines this premium amount?