2015-01-10 04:07:33 来源：解放网-解放日报
Options Basics - Call and Puts
There are two kinds of options. A call
grants its buyer a right (but not an obligation) to buy
100 shares of stock at a specific, fixed price per share before a specific date. Anyone who sells a call grants these rights to a buyer on the other side of the transaction.
grants its buyer a right (but not an obligation) to sell
100 shares of stock at a specific, fixed price per share before a specific date. Anyone who sells a put grants these rights to a buyer of the put.
An option’s premium
is its current value, equivalent to a stock’s market price. The premium value is expressed in a short-hand format representing dollars and cents. For example, if an option is listed with a value of 2, that means $200. If the value is 2.25, a single option is worth $225.
Every option comes with a specific expiration
date. Most options expire within a few months, although a LEAPS
(Long-Term Equity Anticipation Security) option may extend out as far as 30 months. As expiration gets near, the premium will fall in value. At the end of the expiration day (the third Friday of the expiration month), the option is worthless.
If you buy an option, one of four actions is going to occur before expiration. First, you can exercise
the option, meaning you will buy or sell 100 shares of stock for each option you own. (Remember that a call entitles you to buy, and a put entitles you to sell.) Second, the option might be subject to automatic exercise
, meaning that exercise takes place if the option is in the money
. For a call, this means the market value of stock is higher than the strike price
; for a put, it means the market value is lower than the strike price. That price is the price at which a specific option can be exercised in all cases. Third, the option might be out of the money
, in which case automatic exercise will not take place. The option is out of the money when the stock’s market value is lower than a call’s strike price or higher than a put’s strike price. Fourth, the stock’s price may be exactly the same as an option’s strike price. In this case, the option is at the money
. These positions describing proximity between the strike price and current value of the stockare all-important because they determine an option’s premium value.
The Figure below summarizes in the money, out of the money, and at the money for a call.
This Figure below provides the same information for a put.
The names of options are derived from the action occurring upon exercise. For anyone on the short
side (meaning the option was sold), exercise means stock is called away
upon exercise of a call, or that stock is put to the short seller upon exercise of a put. Exercise is also called assignment
because at the time of exercise, a specific call is assigned to a trader. Not all options are necessarily exercised, so assignment occurs when an option owner executes early exercise
of his or her long
position (you are long when you buy an option and short when you have sold).
The figure below shows an example of a buy order of 10 General Electric (GE) put options on the CBOE in the old days
The figure below shows an example of a sell order of 25 Standard & Poor 100 index (OEX) call options on the CBOE in the old days
All options are defined by a series of terms
that cannot be transferred or changed. First is the kind of option (call or put). Second is the strike price. Third is the expiration month. And fourth is the underlying security
, the stock (or other instruments, e.g., a futures contract, an index etc) to which the option refers. All of these terms are needed to distinguish one option from another.
Below is an example of the currently listed options on MicroSoft (MSFT) stock underlying (for March 2015, there are a lot more for other expiries). The listed prices are quoted on a per share basis. As each opition "controls" 100 shares of stocks of MSFT, when you buy or sell these options, the quoted price should be x100.
An option is a legal contract that gives the buyer the right, but the not the obligation (it gives the seller the obligation, but not the right), to buy or to sell, a certain amount of stocks, futures contract, FX, or other underlyings (e.g., indices) at a certain price before or on a certain date at a certain price
There are two basic types of options: calls and puts, both can be bought or sold (long or short)
Other major aspects of options are the strike price, the expiration date etc
Options are widely used in the world financial markets to give investors ways to mitigate/transfer risk or fine-tune their portfolio risk management. Options can also be used, when it is done wisely, as strategic investment vehicles
China has the 2nd largest (after the US) financial markets (for both stocks and futures) in the world. And it will soon start to offer options for the stock market (on ETFs). This creates tremendous opportunities for institutional and retail investors
Our company is dedicated to world-class trading/investing technology R&D and training, including options trading and training. Our mission to fulfil unmet needs for high-quality investment management and training in global financial markets.
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