FAR OPTION Meaning and
Definition
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A "far option" refers to a type of investment or financial instrument that gives the holder the right, but not the obligation, to buy or sell an asset at a predetermined price, known as the strike price, at a future date that is significantly further in the future compared to other options contracts. The term "far" in this context indicates that the expiration date of the option is typically several months or even years away.
Far options are commonly used in various financial markets, including stocks, commodities, and currencies, to speculate on the future direction of prices or to hedge against potential price fluctuations. They can provide investors with the opportunity to control a large amount of the underlying asset for a fraction of its actual cost, leading to potentially substantial profits if the asset's price moves in the desired direction.
Since far options have longer expiration periods, they generally have higher premiums, or prices, compared to options with closer expirations. This is due to the increased uncertainty and risk associated with longer-term predictions. Consequently, far options carry higher potential rewards but also higher risks, as there is more time for the underlying asset's value to move in an unfavorable direction.
Overall, far options enable investors to have flexibility and control over their investment strategies by offering the possibility to profit from future price movements without committing to immediate purchase or sale.
Common Misspellings for FAR OPTION
- dar option
- car option
- var option
- gar option
- tar option
- rar option
- fzr option
- fsr option
- fwr option
- fqr option
- fae option
- fad option
- faf option
- fat option
- fa5 option
- fa4 option
- far iption
- far kption
- far lption
- far pption
Etymology of FAR OPTION
The term "far option" is not a distinct word with its own etymology, but rather a combination of two separate words.
The word "far" comes from the Old English word "feorr", which means "at a distance" or "remote". Over time, it has remained relatively unchanged in its meaning.
The word "option" comes from the Latin word "optio", which means "choice" or "act of choosing". It was borrowed into English in the 17th century.
When combined, the phrase "far option" simply refers to a choice or alternative that is distant in comparison to other available options.
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