Types of Options
(1)Options are classified into call options and put options by rights of the options:
i. Call Options: After paying certain amount of premiums to option seller, option buyer has the right to buy a certain quantity of specific commodity prescribed by option contract from the option seller at predetermined price in the valid period of the option contract, but is not obliged to buy. And the option seller is obliged to sell specific commodity prescribed by the option contract at predetermined price in the option contract upon request of option buyer in the valid period provided by the option contract.
ii. Put Options: After paying certain amount of premiums to option seller, option buyer has the right to sell a certain quantity of specific commodity prescribed by option contract to the option seller at predetermined price in the valid period of the option contract, but is not obliged to sell. And the option seller is obliged to buy specific commodity prescribed by the option contract at predetermined price in the option contract upon request of option buyer in the valid period provided by the option contract.
(2)Options are classified into American options and European options by delivery date of options:
i. American options: It can exercise rights at any time in the valid period prescribed by option contract;
ii. European options: It can exercise rights only on the expiry date prescribed by the option contract and option buyer can not exercise his rights before the contract expiry date. The contract will automatically become invalid after expiry.
iii. The vast majority of US stocks options are American options.
(3)Options are also classified into stock options, interest rate options, commodity options and currency conversion options by the object in the option contract.