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Note 9_Options Primer

Note 9_Options Primer - Introduction to Options Barry M...

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Introduction to Options Barry M. Marchman, Ph.D.
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Intrade Markets (binary options) Who will be kicked off American Idol? Contestant #1 Bid: 23.05 Ask: 32.95 Interpretation: For 32.95 you can bet that contestant #1 loses. If you are right, you get 100. If you guess wrong, you lose your 32.95. If you think this event will NOT happen, you can put 23.05 in your pocket today. If you are right, you keep the money, if you are wrong, you pay 100 later.
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Option - Terminology Contract Features Strike Underlying Expiration – 3 rd Friday 100 shares controlled Other Vocabulary Spot Writer Holder 3
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KO Call Options KO is the ticker symbol for Coca Cola The Bet: KO will rise above ____ before _______ The Players: Writer & Holder Placing the Bet: Holder pays Writer ____ today. Contract size is 100 shares Minimum bet is 100 * _____ = _________ Winning the bet: Holder: S>X Writer: S<X 4
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KO Call Options KO is the ticker symbol for Coca Cola Winning and Losing: Graphically 5
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KO Call Options
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