Ch08 - Mechanics of Options Markets Chapter 8 Click to edit...

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Click to edit Master subtitle style  7/7/11  Options, Futures, and Other Derivatives, 7th  Mechanics of Options Markets Chapter 8 11
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 7/7/11  Options, Futures, and Other Derivatives, 7th  Review of Option Types A call is an option to buy A put is an option to sell A European option can be exercised only at the end of its life An American option can be exercised at any time 22
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 7/7/11  Options, Futures, and Other Derivatives, 7th  Option Positions Long call Long put Short call Short put 33
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 7/7/11  Options, Futures, and Other Derivatives, 7th  Long Call (Figure 8.1, Page 180) Profit from buying one European call option: option price = $5, strike price = $100, option life = 2 months 44 30 20 10 0 -5 70 80 90 100 110 120 130 Profit ($) Terminal stock price ($)
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 7/7/11  Options, Futures, and Other Derivatives, 7th  Short Call (Figure 8.3, page 182) Profit from writing one European call option: option price = $5, strike price = $100 55 -30 -20 -10 0 5 70 80 90 100 110 120 130 Profit ($) Terminal stock price ($)
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 7/7/11  Options, Futures, and Other Derivatives, 7th  Long Put (Figure 8.2, page 181) Profit from buying a European put option: option price = $7, strike price = $70 66 30 20 10 0 -7 70 60 50 40 80 90 100 Profit ($) Terminal stock price ($)
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 7/7/11  Options, Futures, and Other Derivatives, 7th 
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This note was uploaded on 06/26/2011 for the course BUS 316 taught by Professor N/a during the Spring '09 term at Simon Fraser.

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Ch08 - Mechanics of Options Markets Chapter 8 Click to edit...

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