Options, Premium, Moneyness, Payoffs and Hedging

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Options, Premium, Moneyness, Payoffs and Hedging - Article

Options give the buyer a **right without an obligation** and provide asymmetric risk protection in return for a premium. This article explains call and put options, strike price, premium, intrinsic and time value, ITM/ATM/OTM classification, buyer and writer payoffs, breakeven levels, contract premium, and FX hedging decisions. It focuses on the numerical relationships and high-confusion areas important for CAIIB BFM.

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