Ch09HullFundamentals7thEd

Ch09HullFundamentals7thEd - Mechanics of Options Markets...

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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Mechanics of Options Markets Chapter 9 1
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Types of Options 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 2
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Option Positions Long call Long put Short call Short put 3
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Long Call (Figure 9.1, Page 207) Profit from buying one European call option: option price = $5, strike price = $100. 30 20 10 0 -5 70 80 90 100 110 120 130 Profit ($) Terminal stock price ($) 4
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Short Call (Figure 9.3, page 208) Profit from writing one European call option: option price = $5, strike price = $100 -30 -20 -10 0 5 70 80 90 100 110 120 130 Profit ($) Terminal stock price ($) 5
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010 Long Put (Figure 9.2, page 208) Profit from buying a European put option: option price = $7, strike price = $70 30 20 10 0 -7 70 60 50 40 80 90 100 Profit ($) Terminal stock price ($) 6
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Fundamentals of Futures and Options Markets, 7th Ed, Ch 9, Copyright © John C. Hull 2010
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This note was uploaded on 08/22/2011 for the course FINANCE 422 taught by Professor Jiang during the Spring '11 term at Arizona.

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Ch09HullFundamentals7thEd - Mechanics of Options Markets...

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