Ppm Option Market

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OPTION MARKET

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What Are Options?

An option is a contract that gives thebuyer the right, but not the obligation,to buy or sell an underlying asset at a

specifc price on or beore a certaindate.

An option, just like a stock or bond, is

a security. It is also a binding contract with

strictly defned terms and properties.

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 Two Types o Options !alls" #uts

A call gives the holder the right to buy an asset at acertain price within a specifc period o time. $uyerso calls hope that the stock will increasesubstantially beore the option e%pires.

A put gives the holder the right to sell an asset at acertain price within a specifc period o time. $uyerso puts hope that the price o the stock will allbeore the option e%pires.

In the money At the money

Out o the money

!all and #ut Options speciy &'' shares or the

stocks to which they are assigned

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O#TIO( T)*+I(OO-

The strike price : price at which an underlyingstock can be purchased or sold is called. This isthe price a stock price must go above /or calls0 orgo below /or puts0 beore a position can be

e%ercised or a proft. All o this must occur beorethe e%piration date.

Expiration ate the deadline by which theoptions may be e%ercised

The pre!iu! : total cost /the price0 o an option. This price is determined by actors including thestock price, strike price, time remaining untile%piration /time value0 and volatility.

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Participants in the Options Market

&. $uyers o calls

1. 2ellers o calls

3. $uyers o puts

4. 2ellers o puts.#eople who buy options are called holers and those

who sell options are called "riters#

.!all holders and put holders /buyers0 are not

obligated to buy or sell. They have the choice toe%ercise their rights i they choose.

.!all writers and put writers /sellers0, however, areobligated to buy or sell. This means that a seller maybe re5uired to make good on a promise to buy or sell.

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Types O$ Options

A!erican options can be e%ercisedat any time between the date opurchase and the e%piration date. +ost

e%change6traded options are o thistype.

European options are di7erent romAmerican options in that they can onlybe e%ercised at the end o their lives.

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Why %se Options?

&peculation

 The use o options in this manner is the reasonoptions have the reputation o being risky.

8hen you buy an option, you have to be correct indetermining not only the direction o the stock9smovement, but also the magnitude and the timingo this movement.

'e(in( 

A strategy which was created to reduce theincidence o une%pected business risks, in additionto allowing benefts rom such order to invest.

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'o" Options Work 

Options can be traded on the stock e%change ora stock e%change parallel /over the countermarket0. There is a kind o clearing house option/the Option !learing !orporation:O!!0

unctioning as an intermediary between thebroker representing the buyer with the seller. TheAgency is ensuring that each party is ulflling itsobligations

 The seller a call option /through the designatedbroker0 give a number o stocks that made thebenchmark to the O!! and the options buyer wille%ercise the call option buys the shares o O!!

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2TO!; O#TIO(2 I( I2<

Indonesia stock e%change /$)I0 begantrading contracts stock options /;O20 onOctober =, 1''4.

$)I defning stock options as a rightwhich is owned by parties to buy /calloption0 or sell /put option0 to the other

party upon a number o shares /theunderlying stock0 at the price /strikeprice0 and in a certain time.

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2TO!; O#TIO( !O(T*A!T2/;O(T*A; O#2I 2A>A+0

;O2 is an e7ect that contains the right to buy /calloption0 or sell /put option0 o the ?nderlying 2tock/shares o companies listed, which became thebasis o the trade series ;O20 in number and

2trike #rice /the price set by the e%change oreach series ;O2 as a reerence in the )%ercise0, aswell as apply in a certain period.

American type option provides an opportunity to

holders o options /takers0 to e%ercise the right atany time to time to maturity. 8hereas )uropeanOptions just give a chance to the taker to e%ercisetheir rights at the time o maturing time

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!haracteristics o stock options traded inI2<

KO& T)PE *A++ OPTION , P%T OPTION

 Trading ?nit & !ontract @ &'''' stock options

alidity #eriod &, 1 , and 3 months

)%ercise American methods /at any timein certain hours o the day o the)%change, during valid ;O20

 The !ompletion O The )%ercise In cash on T B &, with theguidelinesC call option @ 8+A D strike price

C put option @ strike price D 8+AInitial +argin &'E o the contract value

8+A /weighted moving average0 is the weighted average o theshares underlying the options or3' minutes and will appear ater

the ne%t &F minutes

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2trike #rice The e%ercise price or each series o ;O2 set out Gseries or a call option and a put option or seriesG based on the closing price o the sharesunderlying stock options

 Trading >ours;O2

 C +onday D Thursday

2ession & '.3' D &1.'' 8I$ :: 2ession 1 &3.3' D

&=.'' 8I$

C Jriday

2ession & '.3' D &&.3' 8I$ :: 2ession 1 &4.'' D

&=.'' 8I$

>ours O )%ercise C +onday D Thursday &'.'& D &1.&F and &3.4F D&=.&F 8I$

C Jriday &'.'& D &&.4F and &4.&F D &=.&F 8I$

#remium traded in the ongoing auction o /continuous auction market0

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Options Train( In &in(apore

 There are 1 main options trading tools inthe 2ingapore marketK )5uity Inde%Options " 2tructured 8arrants.

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E-uity Inex Options

)5uity Inde% Options and utures are certainlythe most attractive fnancial instruments in the

2ingapore market.

 The 2ingapore market is the frst market in Asiato introduce )5uity Inde% Options through the2ingapore )%change Lerivatives Tradingimited, which is 2ingapore9s derivativestrading e%change.

Investors can gain direct access to inde%trading in almost every major indices in Asia

through )5uity Inde% Options in 2ingapore.

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Warrants

8arrants are contracts between the issuer andthe investor which allows the investor the rightbut not the obligation to buy or sell theunderlying stock at a f%ed strike price duringe%piration and are securitiMed so that they canbe traded e%actly like a stock in a derivativese%change.

 There are 1 main types o warrants traded inthe 2ingapore marketK 2tructured 8arrants andInvestment 8arrants.

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&tructure Warrants

2tructured 8arrants are the 2ingapore markete5uivalent o 2tandardiMed )5uity Options or2tandardiMed 2tock Options with the ollowingcharacteristics  !all 8arrants and #ut 8arrants work e%actly the same

as !all Options and #ut Options.

  +ainly )uropean style. !an only be e%ercised duringe%piration.

ast trading day or 2ingapore structured warrants is4 business days beore its e%piration day.

  !ustomiMed e%piration date and terms.

  +ostly cash settled without physical delivery ounderlying stock when e%ercised.

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In.est!ent Warrants

Investment 8arrants are 2tructured 8arrantsthat allows the holder to receive dividendpayouts during the lie o the investmentwarrants.

Investment 8arrants cost more to own buthas longer e%piration and lower risk due todividend payouts.

2ymbols o investment warrants are identifedby the NiN in place o the e%ercise style.