FinancialMarketsChap27 - Financial Markets Chapter 27 Key...

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Financial Markets Chapter 27 Key Terms and Key Points Key Terms: Alternative option (either-or option) – An exotic option that has a payoff that is the best independent payoff of two distinct assets American option – An option that the buyer may exercise at any time up to and including the expiration date Bermuda option (Atlantic or limited exercise option) – An option that may be exercised at several specified dates as well as the expiration date of the option Call option – An option that grants the owner of the option the right to buy a financial asset from the other party (the writer) at a specified price (the strike price) European option – An option that buyer may exercise only at the expiration date Exchange-traded option – An option traded on an organized exchange Exercise (or strike) price – The price at which the underlying of an option may be bought or sold Exotic option – A complex over-the-counter option Expiration (or maturity) date – The date after which an option expires FLEX option – Exchange-traded option where certain features of the option can be customized Futures option – An option on a futures contract, which gives the buyer the right to buy from or sell to the writer a designated futures contract at a designated price Long option position – The position of one owning the option and, hence the right to exercise it Long-term equity anticipation securities (LEAPs) – Options on individual stocks that have an expiration date up to three years in the future Option – A contract in which the writer of the option grants the buyer the right, but not the obligation, to purchase from or sell to the writer something at a specified price within a specified
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FinancialMarketsChap27 - Financial Markets Chapter 27 Key...

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