Physical Option

AAA

DEFINITION of 'Physical Option'

An option that is based on a physical asset. Physical options give the owner the right to buy or sell physical assets at a predetermined price and date. They are called "physical" because they are based on assets such as currencies, Treasury debts and commodities, rather than stocks, futures and indexes.

INVESTOPEDIA EXPLAINS 'Physical Option'

As with any other type of option, you can purchase a call or put. You have the right to "call in," or buy, a physical asset by owning a physical call option; you have the right to "put out," or sell, a physical asset by owning a physical put option.

The Chicago Board Options Exchange (CBOE) trades physical options that represent underlying assets such as gold or electricity.

RELATED TERMS
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with ...
  3. Currency

    A generally accepted form of money, including coins and paper ...
  4. Put Option

    An option contract giving the owner the right, but not the obligation, ...
  5. Physical Asset

    An item of economic, commercial or exchange value that has a ...
  6. Multibank Holding Company

    A company that owns or controls two or more banks. Mutlibank ...
Related Articles
  1. The Barnyard Basics Of Derivatives
    Investing Basics

    The Barnyard Basics Of Derivatives

  2. Getting Started In Forex Options
    Options & Futures

    Getting Started In Forex Options

  3. Options Basics Tutorial
    Options & Futures

    Options Basics Tutorial

  4. The Advantages Of SPAN Margin
    Options & Futures

    The Advantages Of SPAN Margin

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center