Put Option
Right to sell an asset at a specified exercise
price on or before the exercise date.
Call Option
Right to buy an asset at a specified exercise
price on or before the exercise date.
Right to buy asset
Long Call Option
Right to sell asset
Long Put Option
Obligation to sell asset
Short Call Option
Obligation to buy asset
Short Put Option
Derivatives
Any financial instrument that is derived from
another. (e.g.. options, warrants, futures, swaps, etc.)
Option
Gives the holder the right to buy or sell a security at a specified price during a specified period of time.
Call Option
The right to buy a security at a specified price
within a specified time.
Put Option
The right to sell a security at a specified price
within a specified time.
Option Premium
The price paid for the option, above the price
of the underlying security.
Intrinsic Value
Diff. between the strike price and the stock price
Time Premium
Value of option above the intrinsic value
Exercise Price
(Striking Price) The price at which you buy or
sell the security.
Expiration Date
The last date on which the option can be
exercised.
American Option
Can be exercised at any time prior to and
including the expiration date.
European Option
Can be exercised only on the expiration date.
Stock Price, Interest Rate, Time to expiration, volatility of stock price
Increases in what lead to positive changes in option prices
negative
Increases in exercise prices are...