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Index option
Index option
An index option is an option which secures the holder against the rise in the price of stock indexes/ stocks
Advantages
- Speed of communication
- Trades may be made through direct telephone communication with employees of the Treasury section.
- The basic difference from classic options is that in classic options the value of the strike option is compared to the current value of the underlying asset while for Asian [index] options……. the value of the strike option is compared with the predefined average value of the underlying asset
- The buyer of the option pays the seller an option premium
- The underlying asset is stock / a stock index
- There is no physical transfer of stock, only financial settlement
- Comfort
- Communication by telephone
Conditions
Conclusion of a TMA contract (Treasury Master Agreement)