IFM9 Ch 06 Show

IFM9 Ch 06 Show - Chapter 6 Financial Options 1 Topics in...

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  1 Chapter 6 Financial Options
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  2 Topics in Chapter Financial Options Terminology Option Price Relationships Black-Scholes Option Pricing Model Put-Call Parity
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  3 What is a financial option? An option is a contract which gives its  holder the right, but not the obligation,  to buy (or sell) an asset at some  predetermined price within a specified  period of time.
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  4 What is the single most important characteristic of an option? It does not obligate its owner to take  any action.  It merely gives the owner  the right to buy or sell an asset.
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  5 Option Terminology Call option:  An option to buy a specified  number of shares of a security within  some future period. Put option:  An option to sell a specified  number of shares of a security within   some future period.
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  6 Option Terminology Exercise (or strike) price:  The price  stated in the option contract at which  the security can be bought or sold. Option price:  The market price of the  option contract.
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  7 Option Terminology  (Continued) Expiration date:  The date the option  matures. Exercise value:  The value of a call  option if it were exercised today =  Current stock price - Strike price. Note:  The exercise value is zero if the  stock price is less than the strike price.
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8 Option Terminology  (Continued) Covered option:  A call option written  against stock held in an investor’s 
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IFM9 Ch 06 Show - Chapter 6 Financial Options 1 Topics in...

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