Optsioon

Optsioon is the Estonian term for a financial option, a derivative contract that gives its holder the right, but not the obligation, to buy or sell a specified asset at a predetermined price before or at a specified expiration date. The underlying asset can be a stock, an index, a commodity, or another security. An option is described by key terms: strike price, expiration date, premium, and type (call or put).

There are two main types: a call option, which gives the right to buy the underlying asset; and a put option, which gives the right to sell. Styles include American options (exercisable anytime before expiration) and European options (exercisable only at expiration). Options can be standardized and traded on exchanges or arranged directly in over-the-counter markets. Settlement may be physical delivery or cash settlement.

Pricing depends on multiple factors: the current price of the underlying, strike price, time to expiration, volatility, interest rates, and expected dividends. The Black-Scholes model is a widely used method for pricing European stock options; other situations use binomial and other models. Market participants monitor Greeks, such as delta, gamma, theta, and vega, to measure sensitivity.

Uses include hedging against adverse moves, generating income through premium collection, and speculating on market directions. Investors buy calls to profit from rising prices and buys puts to profit from falling prices. Writing options can provide income but also entails risk, especially if combined with other positions or in uncovered scenarios.

Regulation and market structure vary by jurisdiction. Exchange-traded options are standardized and cleared through central counterparties, with margin requirements and disclosure rules. The modern options market expanded in the 20th century, especially after the Black-Scholes framework and the growth of major exchanges such as the Chicago Board Options Exchange.