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Put option: A put option gives its buyer the right, but not the obligation, to sell a stock at the strike price prior to the expiration date. When you buy a call or put option, you pay a premium ...
The naked put profit/loss profile is similar to the covered call (see above) profit/loss profile. The naked put generally requires less in brokerage fees and commissions than the covered call. The following return calculation assumes the sold put option is out-of-the-money and the price of the stock at expiration is greater than the put strike ...
Using put–call parity a long butterfly can also be created as follows: Long 1 put with a strike price of (X + a) Short 2 puts with a strike price of X; Long 1 put with a strike price of (X − a) where X = the spot price and a > 0. All the options have the same expiration date. At expiration the value (but not the profit) of the butterfly ...
A box spread consists of a bull call spread and a bear put spread. The calls and puts have the same expiration date. The resulting portfolio is delta neutral. For example, a 40-50 January 2010 box consists of: Long a January 2010 40-strike call; Short a January 2010 50-strike call; Long a January 2010 50-strike put; Short a January 2010 40 ...
To the extent the employer's position can be modeled as a type of option, it is most often modeled as a "short position in a call". From the employee's point of view, the compensation contract provides a conditional right to buy the equity of the employer and when modeled as an option, the employee's perspective is that of a "long position in a ...
For example, for bond options [3] the underlying is a bond, but the source of uncertainty is the annualized interest rate (i.e. the short rate). Here, for each randomly generated yield curve we observe a different resultant bond price on the option's exercise date; this bond price is then the input for the determination of the option's payoff.
A call option is in the money when the strike price is below the spot price. A put option is in the money when the strike price is above the spot price. With an "in the money" call stock option, the current share price is greater than the strike price so exercising the option will give the owner of that option a profit.
In finance, a price (premium) is paid or received for purchasing or selling options.This article discusses the calculation of this premium in general. For further detail, see: Mathematical finance § Derivatives pricing: the Q world for discussion of the mathematics; Financial engineering for the implementation; as well as Financial modeling § Quantitative finance generally.