Ch14HullFundamentals5thEd

Ch14HullFundamentals5thEd - Futures Options Chapter 14...

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Fundamentals of Futures and Options Markets , 5 th Edition, Copyright © John C. Hull 2004 14.1 Futures Options Chapter 14
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Fundamentals of Futures and Options Markets, 5th Edition, 14.2 Mechanics of Call Futures Options When a call futures option is exercised the holder acquires 1. A long position in the futures 2. A cash amount equal to the excess of the futures price over the strike price at previous settlement
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Fundamentals of Futures and Options Markets, 5th Edition, 14.3 Mechanics of Put Futures Option When a put futures option is exercised the holder acquires 1. A short position in the futures 2. A cash amount equal to the excess of the strike price over the futures price at previous settlement
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Fundamentals of Futures and Options Markets, 5th Edition, 14.4 The Payoffs If the futures position is closed out immediately: Payoff from call = F 0 K Payoff from put = K F 0 where F 0 is futures price at time of exercise
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Fundamentals of Futures and Options Markets, 5th Edition, 14.5 Potential Advantages of Futures Options over Spot Options Futures contract may be easier to trade than underlying asset Exercise of the option does not lead to delivery of the underlying asset Futures options and futures usually trade in adjacent pits at exchange Futures options may entail lower transactions costs
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Fundamentals of Futures and Options Markets, 5th Edition, 14.6 Put-Call Parity for Futures Options (Equation 14.1, page 308)
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This note was uploaded on 10/07/2011 for the course FIN 416 taught by Professor Sankarshanacharya during the Fall '11 term at Ill. Chicago.

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Ch14HullFundamentals5thEd - Futures Options Chapter 14...

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