Intended Uses of Options
Loss Reduction of the position which is in Loss
Eur/Usd which is bought on 1.4800 will cause increasingly loss when price decreased. At this point, the parity can be sold on 1.4800 for the loss. Call sell can be done for the next day or for a maturity until market being 1.4800. In this situation, the invester earns premium everyday and can reduce effect of loss of the cash. Insurance which is against loss of exchange rates can reduce of rate risk of a firm which does export and import. The firm can buy 1 million Usd/Try after one month by call buy. In this situation, the firm has 1 million dollars which are certain cost after one month.
Purpose of Use of Speculation
There can be a foreseeable about gold will not be lower than 1400. At this point, the invester can do put sell transaction on 1400 for gold for 15 days. If the gold will not be lower than 1400 after 15 days, the invester will earn premium. If the gold is lower 1400 after 15 days, the option seller has to buy the gold on 1400. In this situation, the invester earns premium again but there will be an opened gold transaction on 1400.
Cost Fixing
The invester can do call sell transaction on 1550 to sell scrap gold which was collected from market. In this situation, if the market price wouldn’t be higher than 1550 the invester just earns premium. If the market price would be higher than 1550 the option seller earns premium again but he/she has to sell this scrap gold on 1550.
Pricing Expectations
An invester buy call option and sell option of Usd/Try parity at same time to fix market risk because of elections in Turkey. In this situation, if the parity goes to 1.7000 after the elections, the invester uses the call buy right and has dollar on 1.6000. The invester has profit because the market is on 1.7000. If the parity would be 1.5000, the invester can sell the parity on 1.6000 because of having puy buy option and he/she would have profit. The profit of the invester can be calculated by suctracting of premium.
