Introduction to call_and_put_options

Jun 28th, 2015
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Abraham Lincoln University
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For a clearer understanding the meaning of “Put Option” is required to be probed into. A “Put Option” as understood in common parlance is an option to sell. A “Put Option” is an Investor’s exit/liquidity option by way of which an Investor can, on the happening of a “Put Trigger” event, compel the promoter/ shareholder of Company to buy its shares either wholly or partly, at a valuation, agreed between the parties. A “Put Option” has become a popular exit option in business practice and has found expression by way was a “Put Option” Clause in Share Holders Agreement (SSA) or Share Subscription Agreements (SHA). This right to sell is not vested in a shareholder by way of law but is a creation of contractual arrangement between the parties. Thus if “Put Option” is not provided in the SSA or SHA then the investor/ shareholder cannot exercise such right to sell.

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Option premium refers to the per-share amount that a buyer pays for an option - for the right to buy/"call" or sell/"put" a security at a specified price in the future. An option premium is a nonrefundable, full payment (not a down payment) for the rights specified in the stock option contract. On

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