Trading options mainly involves contracts. The two contracting parties include the purchaser and the seller. When the contract is completed, the person who was doing the buying starts to have legal rights over the asset that he bought. However, there is an implied term to the contract which obliges the buyer not to sell that particular asset until some period of time elapses.
Such trading contracts have some specifications too. These specifications only affect the two parties in the contract. It will not be considered right if a third party tried to claim rights over the asset. An example of such terms is that the two contracting parties should be legally allowed to carry out this transaction. This is the reason that they need to be having the required legal documents.
There should be various documents verifying that the assets to be transacted satisfy their needed quality. One cannot opt to sell something that does not meet the required standards. By doing this they will be inconveniencing their customers. They also have to look at the transaction price and agree on it. If they do not agree, then there will be no transaction taking place.
Expiration date is also essential. This a date set by the two when the option should take place. After this day has passed, one is allowed to do business wit another person with the asset that they had purchased. The original seller has no say over it any more. Full rights are transferred to the buyer from this time.
There is a variety of types for these trading contracts. One of them is called the exchanged traded option. This type of trading contracts involves mainly standardized form of contracts. These form of contacts in turn make the pricing very accurate. There are examples of this type of option which are stock types, types of future contacts and bond options among others.
There is another one too called the over the counter trade contract. In this transaction, it is two private parties that are involved. The terms involved in this contract too are lenient and unrestricted. The types linked to this contract include interest rate contracts, contracts on swap and finally currency cross rate options.
There are very many styles that are used by these trading options. Bermudan option is just one of the many examples. It works on two major conditions. One can do it within a specified date, or still do it at any date before the expiration date. The European option is just another example. It only applies where the transaction is done on the expiration date. Nothing can go on before this date reaches.
The Asian trading options is also in this category. The underlying average price and pre-set period of time dictate how the option goes. Without these then nothing is done. The American option is the last example though there are many others. It share some similarities with the Bermudan option. It is done on any day before or on the exact date of the expiry date.
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