Options Contracts: Preliminaries ❖ Intrinsic Value
The difference between the exercise price of the option and the spot price of the underlying asset.
Call Option Payoffs
Option payoffs ($)
60
40
Buy a call
20
0 0 10 20 30 40 50 60 70 80 90 100
-20
Stock price ($)
-40
-60
Exercise price = $50
Call Option Payoffs
not the obligation, to buy or sell a given quantity of an asset on (or perhaps before) a given date, at prices agreed upon today.
❖ Calls versus Puts
Call options gives the holder the right, but not the obligation, to buy a given quantity of some asset at some time in the future, at prices agreed upon today. When exercising a call option, you “call in” the asset.
❖ In addition, capital structure and capital budgeting decisions can be viewed in terms of options.
22.1 Options Contracts: ❖ An optionPgriveelsimthienhaorldieersthe right, but
❖ Speculative Value
The difference between the option premium and the intrinsic value of the option.
Option Premium
=
Intrinsic + Speculative
Value
Value
22.2 Call Options ❖ Call options gives the holder the right, but not the obligation, to buy a given quantity of some asset on or before some time in the future, at prices agreed upon today.
❖ If the call is in-the-money, it is worth ST - E.
❖ If the call is out-of-the-money, it is worthless.
CaT = CeT = Max[ST - E, 0] ❖ Where
ST is the value of the stock at expiry
❖ When exercising a call option, you “call in” the asset.
Basic Call Option Pricing Relationships at Expiry
❖ At expiry, an American call option is worth the same as a European option with the same characteristics.
第二十二章 期权与公司理财：基本概 念
22.1 Options ❖ Many corporate securities are similar to the stock options that are traded on organized exchanges.
❖ Almost every issue of corporate stocks and bonds has option features.
22.1 Options Contracts: ❖ ExercisingPthereOlpimtioninaries
The act of buying or selling the underlying asset through the option contract.
❖ Strike Price or Exercise Price
Refers to the fixed price in the option contract at which the holder can buy or sell the underlying asset.
❖ Expiry
The maturity date of the option iate, or the expiry.
❖ European versus American options
European options can be exercised only at
Options Contracts: Preliminaries ❖ In-the-Money The exercise price is less than the spot price of the underlying asset. ❖ At-the-Money The exercise price is equal to the spot price of the underlying asset. ❖ Out-of-the-Money The exercise price is more than the spot price of the underlying asset.