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Unformatted text preview: h the help of
a stockbroker. The other, more popular mechanism is the organized options
exchanges. The dominant exchange is the Chicago Board Options Exchange
(CBOE), which was established in 1973. Other exchanges on which options are
traded include the American Stock Exchange, the Philadelphia Stock Exchange,
and the Pacific Stock Exchange. The options traded on these exchanges are standardized and thus are considered registered securities. Each option is for 100
shares of the underlying stock. The price at which options transactions can be
made is determined by the forces of supply and demand. Options Trading
The most common motive for purchasing call options is the expectation that the
market price of the underlying stock will rise by more than enough to cover the
cost of the option and thereby allow the purchaser of the call to profit.
EXAMPLE Hint Put and call options
are created by individuals and
other firms. The firm itself has
nothing to do with the creation
of these options. Convertibles
and warrants, by contrast, are
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This document was uploaded on 01/19/2014.
- Fall '13