Explanation:

Option derivative- 
1. There are two types of options. A call option gives the holder the right to purchase an asset at an agreed-upon price on or before a specified date. This agreed-upon price is known as the exercise price. It has to be noted that the holder has the option and can choose to not buy the asset. 
2. The purchase price of the option is called the premium. It represents the compensation the purchaser of the call option must pay for the right (but not the obligation) to exercise the option. 
3. It will make sense for the call option holder to exercise his option only if the market price of the asset is greater than the exercise price. Otherwise, he can buy the asset from the market at a lower price. 
4. The call option should increase in value with the increase in the asset price. The call option is the right to buy an asset. Hence, it increases in value, if the price of the asset increases. 
5. A put option gives the holder the right to sell an asset at a specified price. It will make sense for the put option holder to exercise his option only if the exercise price is greater than the market price of the asset. Otherwise, he can sell the asset in the market at a higherprice. 6. The put option should decrease in value with the increase in the asset price. The put option is the right to sell an asset. Hence, it decreases in value, if the price of the asset increases.