Interpreting Futures Price Quotations

Interpreting Futures Price Quotations - 20-1Interpreting...

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Unformatted text preview: 20-1Interpreting Futures Price Quotations•Exhibit 20.3 shows spot and futures prices for contracts on the Standard & Poor’s 500 index as of September 17, 2007–Expiration date–Contract size•Exhibit 20.4 summarizes the payoff and net profit for from a long position’s point of view, assuming a hypothetical set of S&P index levels in the December 20-2Exhibit 20.320-3Exhibit 20.420-4•An option contract gives the holder the right-but not the obligation to buy or to sell an underlying security or commodity at a predetermined future date and at a predetermined price –Option to buy is a call option–Option to sell is a put option–Buyer has the long positionin the contract–Seller (writer) has the short positionin the contractThe Language and Structure of Option Markets20-5•Option Contract Terms–The exercise price (X) is the price the call buyer will pay to-or the put buyer will receive from-the option seller if the option is exercised–The option premium (C0,T)is the price that...
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This note was uploaded on 01/24/2012 for the course FIN 4360 taught by Professor Davidbray during the Spring '12 term at Kennesaw.

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Interpreting Futures Price Quotations - 20-1Interpreting...

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