Call Option Without Strike Price

The majority of the chunk interested in options trading have a question whether a call option without strike price is possible or not. 

Well, the answer is obvious but you must know the proper details related to it. 

Options, as you might already know, gives the right to the buyer or seller to execute the trading deal at the fixed price within the validity period of the contract.

In Options, there is no obligation rather the party is free to exercise the option whenever it feels that the market and stock price are moving in the opposite position.

Typically, there are two different types of options- Call Option and Put Option. 

The call option is exercised by the buyer who is in favor of bullish condition while the latter is exercised by the investor favoring bearish condition. 

Therefore, if any time within the contract the price of the underlying asset or security increases you have the right to exercise the call option. 

Also Read: Spot Pirce and Stike Price

That is why to avoid risks, you must know When to Sell Call Option?

Call Option Without Strike Price Example

Now, let’s talk about is call option without strike price available or not! In the real world, availing of any service without any financial deal is not possible since it’s obvious that why would anyone give you its service without any fee or charge! 

Further, this strike price actually helps you to calculate the profit on the call option. But why the strike price plays an important role. Let’s find out, shall we?

To make understanding easy, let us dive-in into a fictional example. 

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Perhaps, I am driving an old, dodgy, and noisy car at the moment and I am afraid it might break-down at any time, which is why I prefer to travel by cab.

However, the cab has been very expensive for me and I couldn’t spend any more money on the cab facility. 

This is why I decided to sell the current one and purchase a new car after a duration of six months. My current old was bought by my nephew and now, I was looking for a new one. 

One day, I was walking through my park, I came across my neighbor who was talking about his new car- Hyundai Venue.

He wanted to sell it off as he was going abroad. However, the car was like new- shining like a pearl, so he wanted to sell it at the current market price. 

Later, I came to know that I will be transferred to Chennai so I thought it’s best not to have a permanent car right now. Rather a temporary one will be fine. But, also my eyes were on Mr. Jain’s car. 

Quickly, I got an idea! I knew that Hyundai is a good and reliable automobile brand in the market so I will drive this car for a month or less and will later sell it at a higher price. 

The very next day, I went to the same park at the same time to have a detailed discussion on the same with Mr. Jain. I tried to convince him so that he can sell the car at a bit lower price. Finally, he agreed! 

The deal was fixed at Rs. 7.5 lakh and happily I paid the token amount of Rs. 1 lakh to book it. Since I was afraid that this is the best deal which anyone will be willing to have, I couldn’t leave it without booking it.

Mr. Jain and I decided on the date of our deal, which was after two months. I was so cheerful to have a deal on this car! 

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So now a question for you- what did you learn from the example?

Could I have purchased the car without any price? Well, no! The price of any commodity, security, or any asset decided during the option contract is the strike price and no deal can be made without price. 

So, that was all for the day! If you have any questions or doubts, please write them in the comment section shared below-

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