FINS3635 Week 11 - options on other assets (3)

FINS3635 Week 11 - options on other assets (3) - Options on...

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1 Options on different assets (Ch. 16 & Ch. 17) Index options Extension of results for European options on non- dividend-paying stock to European options on a FINS 3635 Week 11 - Options on different assets 1 stock paying a known dividend yield Portfolio insurance Currency options Futures options Exotic Options (Ch. 24: different types of exotic options) Options on Stock Indices Index options began trading in the U.S. on March 11, 1983. The first was the S&P 100 options on CBOT which are American options, while the options on S&P 500 Index (CBOT) are European FINS 3635 Week 11 - Options on different assets 2 on S&P 500 Index (CBOT) are European. Options on smaller portfolios of stocks concentrated in certain sectors have also been introduced such as options on an oil index (a portfolio of energy stocks), a utility index, a gold & silver Index, and a technology index. Index Options The index options are settled in cash rather than by delivering the securities underlying the index. This means that upon exercise of the option, the holder of a call option receives S X in cash and the writer of FINS 3635 Week 11 - Options on different assets 3 of a call option receives S-X in cash and the writer of the call pays this amount in cash. Similarly, the holder of a put option receives X-S in cash and the writer of the option pays this amount in cash.
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