Management and Organizational Studies 1023A/B Lecture Notes - Lecture 8: Option Style, Call Option, Put Option

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

Document Summary

Financial derivative securities: derive all or part of their value from another. Derivative derives their value from something else. Can trade in the options market, can trade in the futures market. You don"t buy a stock; buy an option to buy a stock. Options are created by investors, sold to other investors. Call: buyer has the right, but not the obligation, to purchase a fixed quantity from the seller at a fixed price up to a certain date. Put: buyer has the right, but not the obligation, to sell a fixed quantity to the seller at a fixed price up to a certain date. Employee stock options can"t sell them to anyone else. Call gives you the right but not the obligation (why it"s an option) to buy a share. Put gives you the right but not the obligation to sell a share. It is the buyer of the option to exercise them.