chapter7无文字-金融工程专业new.ppt

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Chapter 7
Options
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Outlines
Concept of Options
Types of options
American options vs. European options
Call options vs. Put options
OTC Options vs. Exchange-Traded Options
positions & payoffs
Terminology
Strategies using options
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Concept of Options
Definition: The right, but not the obligation, to buy (for a call option) or sell (for a put option) a specific amount of a given stock, commodity, currency, index, or debt, at a specified price (the strike price) during a specified period of time.
buyer
premium
Seller/writer
The option’s price
The right to buy or sell
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concept of options
The price at which the asset can be purchased or sold is known as the strike price/exercise price.
The date when the option expires is known as the exercise date, the expiration date, or the maturity date.
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types of options: American options vs. European options
American options can be exercised at any time up to the expiration date.
European options can be exercised only on the expiration date itself.
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types of options: OTC Options vs. Exchange-Traded Options
Options are traded very actively in the over-the-counter market as well as on exchanges.
The main advantage of an over-the-counter option is that it can be tailored by a financial institution to meet the needs of a client.
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continued
Organized exchanges filled the need for standardized option contracts wherein the exchange would specify the contracts’ terms and conditions.
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option positions & payoffs
A call option is an option to buy a certain asset by a certain date for a certain price (the strike price)
A put is an option to sell a certain asset by a certain date for a certain price (the strike price)
You can exercise an option if you wish, but you do not have to do so
Call option & put option
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premium
One contract is for the purchase or sale of 100 shares
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call option example
A trader buys one European call option contract on IBM st