payment by the buyer of an option to the seller (writer; option writer). The writer is obliged to buy (call) or sell (put) the relevant quantity of the underlying security at the agreed price if the holder exercises his option. – The price of an option is usually determined by – the current price of the underlying asset, – the strike price, – the term of the option, – the (risk-free) interest rate during the term of the option, and – the volatility of the return on the underlying asset.
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