We think you have liked this presentation. If you wish to download it, please recommend it to your friends in any social system. Share buttons are a little bit lower. Thank you!
Presentation is loading. Please wait.
Published byKristopher Fann
Modified about 1 year ago
VIII: Options 24: Options
Chapter 24: Options Computers Unlimited Windows Surface 14” Display 64GB White cover Office 2010 **** $1,999 **** Good Til 12/31/12 Expiry Date: December 31, 2012 Type: American (if this said Good Only on 12/31/12 then it would be European) Writer: Computers Unlimited Strike Price: $1,999 Buyer: Coupon Holder Item covered by the contract © Oltheten & Waspi 2012 Call Option
Chapter 24: Options © Oltheten & Waspi 2012 Intrinsic Value The Intrinsic Value of the coupon is $1799 - $1999 = - $200 Out-of-the-money We throw the coupon away (the option expires worthless) Computers Unlimited $1,799. 00 $1,999. 00
Chapter 24: Options © Oltheten & Waspi 2012 Intrinsic Value The Intrinsic Value of the coupon is $1999 - $1999 = $0 At-the-money We throw the coupon away (the option expires worthless) Computers Unlimited $1,999. 00
Chapter 24: Options © Oltheten & Waspi 2012 Intrinsic Value The Intrinsic Value of the coupon is $2199 - $1999 = $200 In-the-money We use the coupon to purchase at $1999. (exercise option) Computers Unlimited $2,199. 00 $1,999. 00
Chapter 24: Options © Oltheten & Waspi 2012 Option expires worthless Exercise Option Payout: Value & Profit What is the breakeven price? P
Chapter 24: Options Options & Futures Buy Futures Sell Futures Buy Soybeans Sell Soybeans Must buy Must sell © Oltheten & Waspi 2012
Chapter 24: Options Options & Futures Buy Option Sell Option Buy shares Sell shares Buy Option Sell Option Sell shares Buy shares To buy or not to buy To sell or not to sell CALL PUT © Oltheten & Waspi 2012
Chapter 24: Options © Oltheten & Waspi 2012 Options Call option Contract that gives the buyer the right, but not the obligation, to buy something at a specific price within a specific time. Put option Contract that gives the buyer the right, but not the obligation, to sell something at a specific price within a specific time.
Chapter 24: Options © Oltheten & Waspi 2012 Call 100 shares of General Electric (GE) **** $30 **** Writer:_____________ Buyer:_____________ Price: $_______per share Expiry: March 2013 Options Contracts Option contracts are standardized by strike price and expiration John Q. Investor Susan Speculator 10.20
Chapter 24: Options © Oltheten & Waspi 2012 Option Contracts GE $30 March call quoted at $10.20 $10 in-the-money GE $50 March put quoted at $12.30 $10 in-the money
Chapter 24: Options Buys a call Write a call Call Option John pays Susan $1,020 Susan must comply with John’s decision to buy or not to buy © Oltheten & Waspi 2012
Chapter 24: Options Option expires worthless John Exercises buying 100 GE from Susan at $30 What is the breakeven price? Buy Call © Oltheten & Waspi 2012
Chapter 24: Options © Oltheten & Waspi 2012 Option expires worthless Susan keeps the $1,020 premium Option Exercised Susan must sell 100 GE to John at $30 What is the breakeven price? Write Call
Chapter 24: Options © Oltheten & Waspi 2012 Option Contracts GE $30 March call quoted at $10.20 In the money by $10 GE $30 March put quoted at $0.40 GE $50 March call quoted at $0.15 GE $50 March put quoted at $12.30 In the money by $10
Chapter 24: Options Buys a put Write a put Put Option John pays Michael $1,230 Michael must comply with John’s decision to sell or not to sell © Oltheten & Waspi 2012
Chapter 24: Options Option expires worthless John Exercises selling 100 GE to Michael at $50 What is the breakeven price? Buy Put © Oltheten & Waspi 2012
Chapter 24: Options Option expires worthless John Exercises: Michael must buy 100 GE from John at $50 Write Put $1230 premium
Chapter 24: Options Options © Oltheten & Waspi 2012 CALLPUT BUY Pays Premium to the writer Buys the right to buy shares Buys the right to sell shares WRITE Receives the premium from the buyer Must sell shares if exercised Must buy shares if exercised
Buy Call Write Call Buy Put Write Put In the Money → | |←In the Money
VIII: Options 25: Options Strategies II. Chapter 25: Options Strategies © Oltheten & Waspi 2012 Collar Hedging strategy on long shares Long 10,000.
VIII: Options 25: Options Strategies. Chapter 25: Options Strategies © Oltheten & Waspi 2012 Strategies Shares Options Strategies combine one or more.
Finance 300 Financial Markets Lecture 25 © Professor J. Petry, Fall 2002
Lecture 2. Option - Gives the holder the right to buy or sell a security at a specified price during a specified period of time. Call Option - The.
“ Calls and Puts ” presented by Welcome to. What is an option? Derivative product Contract between two parties Terms of contract Buyers rights Sellers.
CONTENTS Definitions. Definitions. Four principals types of options. Four principals types of options. Examples. Examples. Complexes strategies. Complexes.
OPTIONS MARKETS: INTRODUCTION Derivative Securities Option contracts are written on common stock, stock indexes, foreign exchange, agricultural commodities,
Chapters 27 & 19 Interest Rate Options and Convertible Bonds Interest rate options Profits and losses of interest rate options Put-call parity Option prices.
Using Agricultural Options. Agriculture Option u An option is the right, but not the obligation to buy or sell a futures contract u predetermined price.
Options are binding contracts that involve risk, and are time bound You buy an option when you want to protect a “position” (long or short on a stock)
1 Chapter 9 Financial Options and Applications in Corporate Finance.
Ch24 and 18 Interest Rate Options and Convertible Bonds Interest rate options Intrinsic value and time value of an option Profits and losses of options.
Mechanics of Options Markets Chapter Assets Underlying Exchange-Traded Options Page Stocks Stock Indices Futures Foreign Currency Bond.
© 2003 The McGraw-Hill Companies, Inc. All rights reserved. Basics of Financial Options.
What is an Option? Definitions: An option is an agreement between two parties that gives the purchaser of the option the right, but not the obligation,
Contemporary Engineering Economics, 6 th edition Park Copyright © 2016 by Pearson Education, Inc. All Rights Reserved Basics of Financial Options Lecture.
A Basic Options Review. Options Right to Buy/Sell a specified asset at a known price on or before a specified date. Right to Buy/Sell a specified asset.
Option Contracts. Call Option Contracts Call option: right to buy an underlying asset at a pre-specified expiration time and exercise price Position –Long.
Lecture 15. Option - Gives the holder the right to buy or sell a security at a specified price during a specified period of time. Call Option -
McGraw-Hill/Irwin Copyright © 2004 by The McGraw-Hill Companies, Inc. All rights reserved Corporate Finance Ross Westerfield Jaffe Seventh Edition.
Professor XXXXX Course Name / # © 2007 Thomson South-Western Chapter 18 Options Basics.
Options Markets: Introduction Faculty of Economics & Business The University of Sydney Shino Takayama.
1 Finance instruments Currency Vanilla options Introduction Currency Barrier options.
International Finance FIN456 Michael Dimond. Michael Dimond School of Business Administration Derivatives in currency exchange Forwards – a “one off”
Currency Options. Meaning of a Currency Option Types of Options Classification of Options Hedging and Speculation Using Currency Options Determining profit/loss.
AGEC 420, Lec 371 Agec 420 – April 24 Review Quiz #8 Markets Options Reminder: Assignments due # 7 (not 10): Data download and Chart, Fri. April 26 # 8:
Chapter 19 An Introduction to Options. Define the Following Terms n Call Option n Put Option n Intrinsic Value n Exercise (Strike) Price n Premium n Time.
Option Strategies Option strategies Call option Long Call Naked call Covered call Put option Long put Naked put Protective put.
Introduction to Equity Derivatives. WHAT IS A DERIVATIVE? There are derivative instruments available which derive their value from: INDICESCOMMODITIES.
Chapter 11 Options and Other Derivative Securities.
Principles of option pricing Option A contract that gives the holder the right - not the obligation - to buy (call), or to sell (put) a specified amount.
Mechanics of Options Markets Chapter Review of Option Types The holder has the right, but he does not have to exercise the right. Whereas, in the.
Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull Mechanics of Options Markets Chapter 8.
Chapter 16, Section 3. Understand what a futures contract is, and how and why people use them Learn the meaning of “puts” and “calls,” and how investors.
CHAPTER 10 OPTIONS. DIFFERENCES BTW OPTIONS AND FUTURES, – AN OPTION CONTRACT PERMITS THE BUYER TO CHOOSE WHETHER OR NOT EXERCISE THE OPTION. IN FUTURES.
Overview of Options – An Introduction. Options Definition The right, but not the obligation, to enter into a transaction [buy or sell] at a pre-agreed.
Vicentiu Covrig 1 Options Options (Chapter 18 Hirschey and Nofsinger)
Aditya Birla Money Limited Copyright Aditya Birla Nuvo Limited 2008 Options 1 “Options” is essentially an Insurance Type of a Standard Contract Entered.
Finance 300 Financial Markets Lecture 26 © Professor J. Petry, Fall 2001
14-0 Week 12 Lecture 12 Ross, Westerfield and Jordan 7e Chapter 14 Options and Corporate Finance.
Vicentiu Covrig 1 Options and Futures Options and Futures (Chapter 18 and 19 Hirschey and Nofsinger)
International Finance FIN456 ♦ Fall 2012 Michael Dimond.
Options Payoff Presented By Prantika Halder MBA-BT-II yr.
1 Chapter 11 Options – Derivative Securities. 2 Copyright © 1998 by Harcourt Brace & Company Student Learning Objectives Basic Option Terminology Characteristics.
1 15-Option Markets. 2 Options Options are contracts. There are two sides to the contract Long Side (option holder): Pays a premium upfront Gets to “call.
THREE WAYS TO BUY A STOCK. THREE WAYS TO BUY A STOCK Options involve risk and are not suitable for all investors. For more information, please read the.
Yazann Romahi 2 nd May 2002 Options Strategies. Synopsis What is an option? Work through an example Call Option What determines the price of an option?
Lecture 41 The Currency Futures and Options Markets Foreign Currency Options Options - General Currency Options Quotations Foreign Currency Speculations.
1 Chapter 16 Options Markets u Derivatives are simply a class of securities whose prices are determined from the prices of other (underlying) assets u.
Vicentiu Covrig 1 An introduction to Derivative Instruments An introduction to Derivative Instruments (Chapter 11 Reilly and Norton in the Reading Package)
© 2017 SlidePlayer.com Inc. All rights reserved.