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Unformatted text preview: merely gives the owner the right to buy or sell an asset. b. Options have a unique set of terminology. Define the following terms: (1) call option; (2) put option; (3) strike price; (4) striking, or strike, price; (5) option price; (6) expiration date; (7) exercise value; (8) covered option; (9) naked option; (10) in-the-money call; (11) out-of-the-money call; and (12) LEAPS. Answer: 1. A call option is an option to buy a specified number of shares of a security within some future period. 2. A put option is an option to sell a specified number of shares of a security within some future period. 3. Exercise price is another name for strike price, the price stated in the option contract at which the security can be bought (or sold). 4. The strike price is the price stated in the option contract at which the security can be bought (or sold). 5. The option price is the market price of the option contract. 6. The expiration date is the date the option matures....
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.
- Spring '08