Management and Organizational Studies 1023A/B Lecture Notes - Lecture 9: Put Option, Call Option, Futures Contract

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 1023A/B
• Professor: Christina Maco

Document Summary

3 reasons investors deal with derivatives: expand investment opportunities: more choices in terms of things they can invest and trade in, lower cost can be cheaper to buy an option than a share. Increase leverage: amplifies the potential gain to the investor: lets say you have you got to invest. You can either buy 100 options at . 00/per. Usually, the option gives you a right to so many shares. Gives you the right to one share-to buy or sell. If you own shares, you have 10 shares x . 00 increase, you made . 00. If you own options, you have 100 options and exercise your right to sell the shares, you have 100 options to 100 shares to. The right to buy or sell a share. Doesn"t mean you own it, but you have the right to buy or sell the share. Value of this option comes from the value its associated with.