Management and Organizational Studies 1023A/B Lecture Notes - Lecture 11: Option Style, Call Option, Montreal Exchange
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MOS 1023A/B Full Course Notes
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Financial derivative securities: derive all or part of their value from another (underlying) security. Why trade these indirect claims: expand investment opportunities, lower cost. Options are created by investors, sold to other investors. Call: buyer has the right, but not the obligation, to purchase a ixed quantity from the seller at a ixed price up to a certain date. Put: buyer has the right, but not the obligation, to sell a ixed quantity to the seller at a ixed price up to a certain date. Exercise (strike) price: the per-share price at which the common stock must be purchased or sold. Expiration date: last date at which an option can be exercised: american, european, bermudan. Option premium: the price paid by the option buyer to the writer of the option, whether put or call. Call buyer expects the price of the underlying security to increase. Call seller expects the price of the underlying security to decrease or stay the same.