They are not a source of financing to the firm

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Unformatted text preview: y investors, not businesses. They are not a source of financing to the firm. Corporate pension managers, whose job it is to invest and manage corporate pension funds, may use call and put options as part of their investment activities to earn a return or to protect or lock in returns already earned on securities. The presence of options trading in the firm’s stock could—by increasing trading activity—stabilize the firm’s share price in the marketplace, but the financial manager has no direct control over this. Buyers of options have neither any say in the firm’s management nor any voting rights; only stockholders are given these privileges. Despite the popularity of call and put options as an investment vehicle, the financial manager has very little need to deal with them, especially as part of fund-raising activities. Hedging Foreign-Currency Exposures with Options hedging Offsetting or protecting against the risk of adverse price movements. The Chicago Mercantile Exchange (CME) and the Philadelphia Stock Exchange (PHLX) offer exchange-traded options contracts on the Canadian dollar, the euro, the Japanese yen, the Swiss franc,...
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This document was uploaded on 01/19/2014.

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