Intro-Options_04

Intro-Options_04 - By Dr. Fernando Diz An Introduction to...

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Unformatted text preview: By Dr. Fernando Diz An Introduction to Options Objectives ❚ Learn what an option contract is. ❚ Learn how to read option quotations in the newspaper. ❚ Understand the differences between selling and exercising an option? ❚ Learn how to calculate the intrinsic value of an option. Options ❚ An option is a contract giving its owner the right (not the obligation) to buy or sell a commodity at a fixed price for a fixed length of time . Options Convey RIGHTS ❚ The right to buy the commodity at a future date is a CALL option. ❚ The right to sell the commodity at a future date is a PUT option. Rights to Buy or Sell a Commodity? ❙ Equities (common stock shares). ❙ Bonds. ❙ Foreign Exchange. ❙ Financial Indices. ❙ Futures on gold, wheat, cattle, electricity, natural gas, crude oil, heating oil,etc. Fixed Price ❚ The fixed price at which you can buy or sell the commodity is called the EXERCISE or STRIKE price. Fixed Length of Time ❚ The rights that an option gives its owner are good until the option EXPIRES....
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This note was uploaded on 02/09/2010 for the course FIN 459 taught by Professor Yildary during the Spring '07 term at Syracuse.

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Intro-Options_04 - By Dr. Fernando Diz An Introduction to...

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