SOCR EduMaterials Activities ApplicationsActivities TradingOptions - Revision history

IvoDinov: /* Description */

2008-08-03T19:07:59Z

‎Description

IvoDinov at 19:00, 3 August 2008

2008-08-03T19:00:58Z

IvoDinov at 18:32, 3 August 2008

2008-08-03T18:32:02Z

IvoDinov at 18:27, 3 August 2008

2008-08-03T18:27:20Z

Nchristo: /* Options */

2008-08-03T16:18:40Z

‎Options

Nchristo: /* Options */

2008-08-03T15:29:53Z

‎Options

Nchristo: /* Options */

2008-08-03T15:21:51Z

‎Options

Nchristo: /* Options */

2008-08-03T15:19:59Z

‎Options

Nchristo: /* Options */

2008-08-03T15:18:47Z

‎Options

Nchristo: /* Options */

2008-08-03T07:18:15Z

‎Options

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 ===Description===
-You can access the Traiding-Options applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.
+You can access the Trading-Options applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.
 ===Definition===

@@ Line 3: / Line 3: @@
 ===Description===
-You can access the portfolio applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.
+You can access the Traiding-Options applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.
 ===Definition===

← Older revision		Revision as of 18:32, 3 August 2008
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−	== Options ==	+	== [[SOCR_EduMaterials_ApplicationsActivities \| SOCR Applications Activities]] - Options==
		+

	===Description===		===Description===

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 == Options  ==
-* '''Description''':  You can access the portfolio applets for the options trading strategies at http://www.socr.ucla.edu/htmls/app/ .
+===Description===
 An option is a contract between two investors:
 <br>
-* Issuer (or seller), holder of a short position.  He sells the option.
+* '''Issuer''' (or seller), holder of a short position.  He sells the option.
 <br>
-* Holder (buyer), holder of a long position.  He buys the option.
+* '''Holder''' (buyer), holder of a long position.  He buys the option.
 <br>
-'''Types of options:'''
 <br>
-* Call option: Gives the holder the right to buy an asset by a certain date for a certain price called exercise price with a fee.  This fee it is the price of the option or premium.
+* '''Call option''': Gives the holder the right to buy an asset by a certain date for a certain price called exercise price with a fee.  This fee it is the price of the option or premium.
 <br>
-* Put option: Gives the holder the right to sell an asset by a certain date for a certain price called exercise price with a fee.  This fee it is the price of the put or premium.
+* '''Put option''': Gives the holder the right to sell an asset by a certain date for a certain price called exercise price with a fee.  This fee it is the price of the put or premium. The date specified it is called: the expiration date or maturity date.  The price specified it is called the exercise price or the strike price.
 <br>
-There are European options (can be exercised only on the expiration date) and American options (can be exercised at any time up to the expiration date).
+There are ''European options'' (can be exercised only on the expiration date) and ''American options'' (can be exercised at any time up to the expiration date).
 <br>
 * Options are normally traded in units of 100 shares.  The price of the option is on a per share basis.  Therefore, if the price of an option is priced at $0.50, the total premium for that option would be <math>\$50</math> (<math>0.50 \times 100 = \$50</math>).
 <br>
@@ Line 28: / Line 30: @@
 The call option will only be exercised if the stock price at expiration is larger than the exercise price.  In this case the holder of the call will have a positive payoff.   The put option will only be exercised if the stock price at expiration is lower than the exercise price.  In this case the holder of the put will have a positive payoff.  The two figures below shows when the holder or the seller make a positive payoff.
 <br>
@@ Line 49: / Line 50: @@
 <center>[[Image: Christou_bear_spread.jpg|600px]]</center>
-<br>
+===References===
-* The materials above was partially taken from <br>
+The materials above was partially taken from:
-''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003, and <br>
+* ''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003.
-''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.
+* ''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.

← Older revision		Revision as of 16:18, 3 August 2008
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	<center>[[Image: Christou_bear_spread.jpg\|600px]]</center>		<center>[[Image: Christou_bear_spread.jpg\|600px]]</center>

−	<br>	+	<br>
		+	* The materials above was partially taken from <br>
		+	''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003, and <br>
		+	''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.

← Older revision		Revision as of 15:29, 3 August 2008
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	== Options ==		== Options ==
		+
		+	* '''Description''': You can access the portfolio applets for the options trading strategies at http://www.socr.ucla.edu/htmls/app/ .

	An option is a contract between two investors:		An option is a contract between two investors:

@@ Line 18: / Line 18: @@
 '''Stock options mechanics:'''
 <br>
-* Options are normally traded in units of 100 shares.  The price of the option is on a per share basis.  Therefore, if the price of an option is priced at $\$0.50$, the total premium for that option would be <math>\$50</math> (<math>0.50 \times 100 = \$50</math>.)
+* Options are normally traded in units of 100 shares.  The price of the option is on a per share basis.  Therefore, if the price of an option is priced at $0.50, the total premium for that option would be <math>\$50</math> (<math>0.50 \times 100 = \$50</math>).
 <br>
 * Stock options are on a January, February, or March cycle.  Stocks are randomly assigned in one of these three cycles.  For example, IBM is on a January cycle (options can be bought on Jan, Apr, Jul, Oct).

@@ Line 41: / Line 41: @@
 <br>
-<center>[[Image: Christou_butterflyl_calls.jpg|600px]]</center>
+<center>[[Image: Christou_butterfly_calls.jpg|600px]]</center>
 <br>

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 <br>
-INSERT FIG 1
 <br>
-INSERT FIG 2
 <br>
-\noindent There is an infinite number of combinations that one can make using call and put options.  Some of the combinations have special names, like straddles, strips, straps, bull spreads, bear spreads, butterfly spreads, covered call, etc.  All these are shown in the SOCR Trading Options applet.  Here are some snapshots:
+<center>[[Image: Christou_butterflyl_calls.jpg|600px]]</center>
 <br>
-INSERT FIG 4
 <br>