文档介绍：Mechanics of Options Markets Chapter 7
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Types of Options
A call is an option to buy
A put is an option to sell
A European option can be exercised only at the end of its life
An American option can be exercised at any time
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Assets Underlying Exchange-Traded Options Page 151-152
Stocks
Foreign Currency
Stock Indices
Futures
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Specification of Exchange-Traded Options
Expiration date
Strike price
European or American
Call or Put (option class)
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Terminology
Moneyness :
At-the-money option
In-the-money option
Out-of-the-money option
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Terminology (continued)
Option class
Option series
Intrinsic value
Time value
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Dividends & Stock Splits (Page 154-155)
Suppose you own N options with a strike price of K :
No adjustments are made to the option terms for cash dividends
When there is an n-for-m stock split,
the strike price is reduced to mK/n
the no. of options is increased to nN/m
Stock dividends are handled in a manner similar to stock splits
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Dividends & Stock Splits (continued)
Consider a call option to buy 100 shares for $20/share
How should terms be adjusted:
for a 2-for-1 stock split?
for a 5% stock dividend?
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Options, Futures, and Other Derivatives, 5th edition © 2002 by John C. Hull
Market Makers
Most exchanges use market makers to facilitate options trading
A market maker quotes both bid and ask prices when requested
The market maker does not know whether the individual requesting the quotes wants to