The models used to value these options are typically

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Unformatted text preview: e definitional aspects of options. The models used to value these options are typically discussed in more advanced financial management textbooks. 696 PART 6 Special Topics in Managerial Finance put option An option to sell a specified number of shares of a stock (typically 100) on or before a specified future date at a stated price. $50 per share, a call option on the stock initiated today will probably have a striking price set at $50 per share. One must pay a specified price (normally a few hundred dollars) to purchase a call option. A put option is an option to sell a specified number of shares of a stock (typically 100) on or before a specified future date at a stated striking price. Like the call option, the striking price of the put is set close to the market price of the underlying stock at the time of issuance. The lives and costs of puts are similar to those of calls. Options Markets There are two ways of making options transactions. The first involves making a transaction through one of 20 or so call and put options dealers wit...
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