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Using option prices to predict stock returns: The role of price pressure on the stock market

Allaudeen Hameed
Allaudeen Hameed10/11/2019 06:30 AM GMT+08  • 5 min read
Using option prices to predict stock returns: The role of price pressure on the stock market
SINGAPORE (Oct 14): The concept and use of financial options have existed for centuries. One of the earliest documented option trades is found in Aristotle’s fourth-century BC book, Politics, in which he documents how Thales of Miletus profited from a p
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SINGAPORE (Oct 14): The concept and use of financial options have existed for centuries. One of the earliest documented option trades is found in Aristotle’s fourth-century BC book, Politics, in which he documents how Thales of Miletus profited from a plentiful olive harvest by using an options contract.

Anatomy of an option

Simply put, an option is like a prepaid dis-counted voucher that gives the right to buy or sell the underlying asset at a fixed price, with a maturity date. This allows investors to make a profit if the price moves in their favour.

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