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Home Categories Strategy & Education In option trading, “exercise” means to exercise the right to buy or sell the underlying security specified in the option contract. The exercise price of an option is the price at which the underlying security can be bought or sold. Exotic options are option contracts that differ from traditional options in terms of payment structures, expiration dates, and strike prices. Expiration is the exact date and time when derivatives contracts cease to trade and any obligations or rights come into effect or expire. The extrinsic value is the difference between the market price of an option, also known as its premium, and its intrinsic price, which is the difference between the strike price of the option and the price of the underlying asset. The floating exchange rate is determined by supply and demand on the open market. A trader on the trading floor is a member of the exchange who makes transactions on the trading floor of the exchange solely at his own expense. A currency swap is an agreement between two parties to exchange interest rates on their loans in different currencies. Forex is a global trading platform for the exchange of national currencies. Foreign exchange risk refers to the losses that an international financial transaction may incur due to fluctuations in foreign exchange rates.