Flash Cards #1

Flash Cards #1 - Examples of future contracts: financial...

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Unformatted text preview: Examples of future contracts: financial futures (i.e., S&P 500, T-bonds, foreign currencies, and others), commodity futures (i.e., wheat, crude oil, cattle, and others) Potential gains/losses: At maturity, you gain if your contracted price is better than the market price of the underlying asset, and vice versa. If you sell your contract before its maturity, you may gain or lose depending on the market price for the contract option premium The price you pay today to buy an option strike price / exercise price The specified price at which the underlying asset can be bought or sold Call Options Buyers profit when the market price minus the strike price is greater than the option premium. Sellers profit when the market price minus the strike price is less than the option premium. Note that, for buyers, losses are limited, but gains are not Put Options Buyers profit when the strike price minus the market price is greater than the option premium. Sellers profit when the strike price minus the market price is less than the option premium. Note that, for buyers and sellers, gains and losses are limited -------------- Mutual Funds a means of combining or pooling the funds of a large group of investors. Most mutual funds are created by investment advisory firms (say Fidelity Investments) or brokerage firms with investment advisory operations (say Merrill Lynch) Investment Company business that specializes in pooling funds from individual investors and making investments...
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This note was uploaded on 11/18/2011 for the course FIN 355 taught by Professor Phsiao during the Fall '08 term at S.F. State.

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