Option Using Price

We specified an option is an agreement which gives right of buying or selling to the invester who bought the option, and obligation of buying or selling to the invester who sold the option the above definition of option. The price ,which  If the invester who bought the option demands on it, is the using price. The using price of option agreement is choosed by option seller or buyer.

For instance, a cotton call option which is priced 2 TL gives the right of buying the sum certain in cotton to invester who buys the call option since end of the value date. If the invester who buys the call option wants to use the option, he/she would tell this to clearing agency via brookage. The option seller who is choosed by clearing agency by random, has the obligation of selling the cotton to invester who buys the call option on 2 TL.

Option Maturity

There is a maturity for option contracts like forward contracts. Option maturity shows the date of buying or selling right of option buyer and obligation of option seller. Look at the above described cotton example again, and assume that the option maturity is current for the December 2005. We can say that the investor who buys the option has the right of buying the cotton on 2 TL until December 2005, and the investor who sells the option has the obligation of selling the cotton on 2 TL until December 2005.

Option Primemium

Premium defines the price of option in option terminology. The option buyer pays premium to seller to has the right of option. The premium represents income to seller and creates cost for buyer. There a lot of factors which affects the option premium. Some of these factors;

• Type of option, namely put option or call option
• Difference between use price and price of asset that make up the basis of option
• Remaining days of option maturity
• Volatility of underlying asset or the indicator
• The factors which affects the option will be defined in next topics.

Collateralization in Option Transactions

The investor who buy the option doesn’t have to give a guarantee. The investor pays premium and buy the option. But investors who sell the option has to give a guarantee which is determined by clearing agency. The reason of necessity of giving guarantee for invester who sells option is limited profit chance and unlimited loss risk.

Using of Options and Swap Transactions

We explained that, American type options can be used when the owner wants and Europa type options can be used when the maturity end.
Basis of implementation of Eurpo type options is determined by stock markets. The stock market which wants time spread of using, accept the using demands of investors in a time period when is near the last day of transaction. For example; options accept the applications of beneficiaries on the announced its first use day, three weeks before the last trading day. Then, the stock market can accept the demands of beneficiaries on the second announced day of using. If the option beneficiaries don’t use the option in the maturity, stock market would use the option automaticly after the last trading day. Utaliziation by automaticly, if the options are used, options uses if the beneficiary is guaranteed a certain profit after the cost of transactions.

Options are available process of clearing when the options’ use. Cases when the underlying assets are futures contracts, the clearing agency records the account of investor ,who buys the call option, as long futures position over the use price, and records the account of investor,who sells the call option, as short futures position ovet the use price and the loosing side sends money to winning side according to closing price of underlying asset. This system is also acceptable for put options. When the maturity end, the clearing agency records the option as short futures position over the using price on the account of investor who buys put option. And it records the option as long futures position over the use price on the account of investor who sells put option. After this record, the daily procedure is used and the investor who has loss sends money to investor who has profit. Swap of American type options which can use before the end of the maturity occurs by the same procedures using.

Filling Option Trading

Options transactions can used by a brookage which is a member of stock market. The investor has to open an account on a authorized member of stock market to do transaction. The rules of opening account are on the regulations of Capital Market Boards. There is a signature between the brookage and investor and brookage takes the identity information of investor and gives information about option transaction when open an account. The investor can start to do transaction after the account open. The investor can transmit the buy or sell requests by talking or he/she can transmit them by phone or computer screen accourding to contract. The investor reports the orders with one of forms of price determination. The investor can want to buy the contract on the market price or a specified price. Also there is information about which transaction will be on the contract and it will be buy or sell on the orders. The brookage transmits the received orders to stock market. The brookege gives information about the transaction after the brookage takes the premium and guarantee which are necessary to do transactions from the investor before doing transactions. The transaction which are on the stock markets are guaranteed by clearing agency and watched on there.