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Lecture 9

Management and Organizational Studies 1021A/B Lecture Notes - Lecture 9: Strike Price, Call Option, Fixed Price

Management and Organizational Studies
Course Code
MOS 1021A/B
Michael Aloisio

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1.expand investment opp Trading option
2. Lower cost
3. Increase leverage exam q
Buy one share profitable long term investment
60 bugs can buy one share same control of the one share through other option
Buy 25 instead of one
2 major types of stock call and put
Call option give you the option in choice not obligation you don't have to but you can to buy a
share stock in an accept price by a certain days
Call the person you have to sell me in a specific price-- deal
Call me by purchase
You have a right to buy or sell , from another shareholder not new shareholders deal with us
nothing to deal with company
Put you have the choice but not the obligation to sell a stock at a certain price by a certain days
Fixed price= exercise price
You know what a price you are able to buy
Expiration How the option can't use anymore
Three kinds exam q
American best option exercise your option any point up to expiration date gives u most choice
any point u want whenever
You can only exercise your option on very last date one just June 1st
Bermuda kind of between
Can do it at any time but at certain time between now to June 1st but only Friday
Know differences
Option premium the amount of money the ppl wants the option has to paid to the person giving
the option
Call option call= buy two ppl anytime
Me I am creating and selling the option
Writer taking the risk majority
You bought the option from me
Option: 1 share of bell @$40 until June 1st
Why would u buy option because u hoping price will go up at any time I have to sell to u at $40 I
am hoping price will not make to 40, stay below $40
Price today was $38
U pay me $2, I give u option $2-premium
Control the option of $2
Price goes up to 48
U call me to sell at 40
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