What is the revealed option?
Exposed options are options that are not supported by another position. Sometimes it is referred to as a naked option, it is possible for the investor to sell the uncovered option together with the right to buy a basic investment for a specified strike. This is despite the fact that the investor does not have control over the basic investment. In the event that the buyer decides to exercise his right to purchase underlying investment, the seller will have to buy the underlying assets and sell it according to the conditions specified in the sale of the exposed election.
With this type of investment strategy there is an element of risk. We hope that if the buyer decides to purchase a basic investment, the seller will be able to obtain an investment at a price lower than the rate cited to the buyer. In the case of this, profit can be achieved from the transaction. In order to maximize Tje, it is important for this scenario to thoroughly explore the performance of the basic investment, so the prices cited as part of the revealed option will cover all costs ofacquisition.
Unfortunately, the revealed option can easily lead to a loss. This is likely to happen if the seller does not investigate the status of the underlying investment and offers the buyer a lower price of the exposed options. The loss may also occur when the possibility of calling associated with basic investment shifts due to unforeseen factors such as political changes or unexpected weather conditions. When the shift creates higher demand for investment, the market price exceeds the strike price, which requires more cash expenses to ensure control of the investment.
Despite the participating risks, the possibility of ordinary investrategies for many individual and institutional investors is uncovered. The method creates a return enough often so that the exposed option remains a viable strategy in many markets. However, a revealed option is not recommended for a beginner because the assessment of chances of success requires higherLevel of knowledge and experience with the investment process.