E120 random notes

E120 random notes - (ST to be LOWER than strike price K We...

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Call Option: Because we are going to be BUYING the stocks at strike price K, we want the end of period stock price (ST) to be HIGHER than strike price K. We BUY the stocks at a LOW K with however many shares we have, and then sell it at the stock price (ST). - Want: ST > K o i.e. , ST – K > 0 Put Option: Because we are going to be SELLING the stocks at strike price K, we want the end of period stock
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Unformatted text preview: (ST) to be LOWER than strike price K. We are obligated to SELL the stocks at a HIGH K with however many shares we have, therefore we will buy the shares at the stock price (ST) and then s our strike price K.-Want: ST < K o i.e., K – ST > 0...
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This note was uploaded on 01/25/2011 for the course E 120 taught by Professor Alder during the Spring '08 term at Berkeley.

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