predeals

Predeals are a type of financial instrument that provides the holder with the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before a specified expiration date. These instruments are often used for hedging against price fluctuations or for speculative purposes. The value of a predeal is derived from the value of the underlying asset, which can be anything from stocks and bonds to commodities and currencies.

There are two main types of predeals: call predeals and put predeals. A call predeal gives the holder the right to buy the underlying asset, while a put predeal gives the holder the right to sell it. The predetermined price at which the transaction can occur is known as the strike price. The expiration date is the last day on which the predeal can be exercised.

Predeals are typically traded on exchanges, where their prices are determined by supply and demand. The cost of a predeal is called the premium, which is paid by the buyer to the seller. If the market price of the underlying asset moves in favor of the predeal holder before expiration, the predeal may become profitable. Conversely, if the market price moves unfavorably, the predeal may expire worthless, and the holder will lose the premium paid. The use of predeals involves risk, and investors should be aware of these risks before engaging in such transactions.