Question

What is a derived asset? First do some research on an “option”. There are two types of options in finance-put and call. Explain in a layman’s language, the difference between the two. In current financial markets, would you invest in a put or a call option?

Answer 1

A derived asset is asset which is used to value financial asset like derivative that is their value are computed through derived asset . for example stock is derived asset for valuing option

An option is a derivative contract in which one party, the buyer, pays a sum of money to the other party, the seller or writer, and receives the right to either buy or sell an underlying asset at a fixed price either on a specific expiration date or at any time prior to the expiration date.

Call option An option that gives the holder the right to buy an underlying asset from another party at a fixed price over a specific period of time

Put Option An option that gives the holder the right to sell an underlying asset to another party at a fixed price over a specific period of time.

In current financil market it is better to invest in call option since S&P 500 which show the market sentiment has gone up by 21% in last 1 year therefore if we buy cll option we will only have to pay premium and there is more likely chance of market going up as market is recovering