FINS1612 Lecture Notes - Lecture 11: Call Option, Put Option, Financial Instrument
Document Summary
Types of options and some terminology: call options, put options. The right to buy the commodity or instrument at the exercise price. The right to sell the commodity or instrument at the exercise price: options can be exercised either: Ay time up to expiration date (american: premium. The price paid by an option buyer to the writer (seller) of the option: exercise price or strike price. The price specified in an options contract at which the option buyer can buy or sell. The value of the option to the buyer or holder (long call party) is: V = max(s - x, 0) - p. The value of the option to the writer (short call party) is: V = p - max(s - x, 0) Put option & payoff profile: a put option for shares in a listed company at a strike or exercise price (x) of , and premium (p) of . 50.