Options

We develop standard (“vanilla”) and structured (“exotic”) option contracts in line with customers’ needs so that they may confidently conduct their business activities while simultaneously minimizing the risks they assume.

An option contract is an agreement to buy or sell a particular asset on an agreed-upon date in the future at a price determined at the time the contract is entered into. An option contract differs from a forward contract in that it’s not absolutely certain that the agreed-upon transaction will take place on or before the agreed-upon date. That is, it gives the party that buys the option the right but not the obligation to conclude a purchase or sale at the current market price. For example an option contract based on a particular exchange rate may give a party the right to buy (“call”) or sell (“put”) an amount of that currency at a specified price (“strike price”). The party purchasing the option will exercise the right to buy or sell if and when it is advantageous to do so. (The party selling the option by contrast is contractually obliged to carry out the transaction.)

The price of an option is determined by five essential factors: the spot price of the underlying asset, the strike price (the price that triggers the option), the number of days remaining until the contract’s maturity, the volatility in the underlying asset’s price, and the theoretical “risk-free interest rate”.

The risk incurred by someone buying an option contract is limited to the amount of the premium that he pays to the seller. For the seller, who also incurs principal risk on the contract, the risk is potentially unlimited.

For detailed information about the tax consequences of options trading in Turkey please click here.

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