Flashcards
Options
Flashcards do conjunto (11)
- 1What is a derivative security?A security whose cash flows depend solely on the prices of other marketed assets
- 2What is an option?Gives investors the right to buy or sell a security in the future
- 3What is a call and a put option?Call option: Gives the owner the right to buy the asset
Put option: Gives the owner the right to sell the asset - 4What is exercising?The holder buys or sells a share of stock at the agreed-upon price
- 5What is strike price (K)?the price when the option is exercised
- 6What is the difference between an American and a European option?American: can be exercised on any date up to and including the expiration date
European: can only be exercised on the expiration date - 7What is the option premium?market price of an option. And upfront payment that compensates the seller for the risk of loss
- 8What is at-the-money, in-the-money and out-of-the-money?at-the-money: S=K
in-the-money: payoff from exercising is positive
Call: KS
out-of-the-money: Payoff from exercising is negative
Call: K>S, Put: K - 9What is hedging?Reducing risk by holding options whose payoffs are negatively correlated with some risk exposure
- 10What is speculating?Placing a bet on the direction they believe the market will move. It is a smaller investment than investing in the market index itself
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Informações
- Descrição
- Finance FlashCards sobre Options, criado por Linnéa Ekberg em 15-10-2018.
- Criado por
- Linnéa Ekberg
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