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Unformatted text preview: There are European options (can be exercised only on the expiration date) and American options (can be exercised at any time up to the expiration date). Stock options mechanics: 1. Options are normally traded in units of 100 shares. The price of the option is on a per share basis. Therefore, if the price of an option is priced at $0 . 50, the total premium for that option would be $50 (0 . 50 100 = $50.) 2. Stock options are on a January, February, or March cycle. Stocks are randomly assigned in one of these three cycles. For example, IBM is on a January cycle (options can be bought on Jan, Apr, Jul, Oct). 3. Stock options expired on the Saturday immediately following the third Friday of the expiration month....
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- Spring '11