Put option Example Right to sell at a strike price

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Presentation transcript:

Put option Example Right to sell at a strike price Strike price is R100 Market price = R95 R100 > R95 sell at strike price Market price = R105 R 100<R105 Sell at market price Market price = R100 R100 = R100 Indifferent Right to sell at a strike price Want to sell at highest possible price, Thus when strike price > market price option is in the money When strike price < market price option is out of the money When strike price = market price option is at the money

option is out of the money Call option Example Strike price is R100 Market price = R95 R100 > R95 Buy at market price Market price = R105 R 100<R105 Buy at strike price Market price = R100 R100 = R100 Indifferent Right to buy at a strike price Want to buy at lowest possible price, Thus when strike price > market price option is out of the money When strike price < market price option is in the money When strike price = market price option is at the money

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