Definition of an OPTION contract
|
|
- Mavis Wilkinson
- 6 years ago
- Views:
Transcription
1 Options Contracts - Definition Definition of an OPTION contract An OPTION contract is an agreement in which a seller (writer) conveys to a buyer (holder) of a contract the right, but not the obligation, to buy or sell a specific quantity of something at a specified price on or before a specified date The option writer has the obligation to fulfill his side of the contract if the option holder decides to exercise the option
2 Options Contracts - Definition Options are derivative contracts derived from the underlying global commodity price A financial agreement between two parties that gives the buyer the right to buy a futures contract within a specified time at a specific price level Options have an upfront cost (like an insurance policy) Options are a paper contract that gives you the option to buy or sell at a later date, without the obligation to do so Options are transferable and standardised contracts that specify: Price Quantity Delivery date Settlement date
3 Options Contracts - Terminology CALL Option Gives the buyer (option holder) the right to BUY the underlying asset by certain date at a certain price Gives protection against RISING prices PUT Option Gives the buyer (option holder) the right to SELL the underlying asset by certain date at a certain price Gives protection against FALLING prices
4 Options Contracts - Terminology STRIKE PRICE The price at which the underlying asset is bought or sold upon exercise of the option PREMIUM The market price or the amount paid to purchase the option EXPIRATION DATE The last day the option may be exercised EXERCISING The act of cashing in the option to realize the financial benefit (i.e. its worth)
5 Options Contracts Terminology variety of options AMERICAN OPTION options which can be exercised during the whole duration of the contract, i.e. at any time on or before the specified maturity date EUROPEAN OPTION options which can be exercised only at the end of the contract or at the maturity date i.e. on a specified date ASIAN OPTION option whose payoff depends on the average price of the underlying asset over a certain period of time as opposed to at maturity. Also known as an average option
6 Options Contracts - Terminology OPTIONS can be BOUGHT or SOLD CALL BUY a CALL Option Get the right to BUY an underlying asset SELL a CALL Option Give the right to BUY an underlying asset PUT BUY a PUT Option Get the right to SELL an underlying asset SELL a PUT Option Give the right to SELL an underlying asset
7 Options Contracts Put Options This example illustrates how a put option provides a trader with a price floor, protecting him from a falling coffee price (if it falls below the floor level chosen) Experience of price volatility without a price floor Experience of price volatility with a price floor Price Floor Protected Less Costs of Protection = Price Received Planting Harvest Sale Market Price Planting Harvest Sale
8 Options Contracts Put Options Example when Prices Fall Physical Position Put Option Utilization APRIL: Trader purchases 10,000 lbs coffee at basis 140 cents/lb APRIL: Trader purchases a put option for 10, cents lb Cost: $0.04 cent/lb September international coffee price at 130 cents / lb SEPTEMBER: Sells coffee at 130 cents / lb (10 cents/lb loss) SEPTEMBER: Exercises options at 140 cents / lb (10 cents/lb gain) (minus 4 cents/lb cost of options) Position per lb = 10 cent / lb loss on physical coffee plus gain of 10 cents / lb on options minus 4 cent/lb option premium
9 Options Contracts Put Options Example when Prices Rise Physical Position Put Option Utilization APRIL: Trader purchases 10,000 lbs coffee at basis 140 cents/lb APRIL: Trader purchases a put option for 10, cents lb Cost: $0.04 cent/lb September international coffee price at 150 cents / lb SEPTEMBER: Sells coffee at 150 cents / lb (10 cents/lb gain) SEPTEMBER: Options expire no return as they are out of the money (loss of 4 cent/lb option cost) Position per lb = 10 cent/lb gain on physical coffee, no gain on options contract minus 4 cent/lb option premium
10 Options Contracts Call Options Call Options provide a trader with protection against prices rising Experience of price volatility without a price ceiling Experience of price volatility with a price ceiling Global Market Price $1.65 Global Price Paid = Global Market Price $1.65 Strike Price $1.55 Global Price Paid =Global Market Price + Cost of the Protection $1.58/lb Planting Harvest Sale Planting Harvest Sale
11 Options Contracts Call Option Example when Prices Rise Physical Position APRIL: Call Option Utilization APRIL: Trader agrees to deliver 10,000 lbs coffee at basis 140 cents/lb in September Trader purchases a call option for 10, cents lb Cost: $0.04 cent/lb September international coffee price at 150 cents / lb SEPTEMBER: SEPTEMBER: Purchases 10,000 lbs of coffee to meet contracted delivery obligations at 150 cents/lb Exercises options and realizes 10 cents / lb (minus 4 cent/lb cost of option) Position per lb = 10 cent / lb loss on physical coffee plus 10 cents / lb gain on options minus 4 cent/lb option premium
12 Options Contracts Call Option Example when Prices Fall Physical Position APRIL: Trader agrees to deliver 10,000 lbs coffee at basis 140 cents/lb in September Call Option Utilization APRIL: Trader purchases a call option for 10, cents lb Cost: $0.04 cent/lb September international coffee price at 130 cents / lb SEPTEMBER: Purchases 10,000 lbs of coffee to meet contracted delivery obligations at 130 cents/lb (gain of 10 cents / lb) SEPTEMBER: Options expire no return as they are out of the money (loss of 4 cent/lb cost of option) Position per lb = 10 cent / lb gain on physical coffee with no gain on options minus 4 cent/lb option premium
13 Options Contracts Options Payouts An option has value (pays out) or is in the money when the market price at the time of exercising the option is: For a put option, below the strike price For a call option, above the strike price IN THE MONEY An in the money option has a strike price that is more advantageous than the current market price of the underlying asset OUT OF THE MONEY In an out of the money option the price of the underlying is more advantageous than the strike price of the option AT THE MONEY If there is no-profit, no-loss by exercising option at that moment in time INTRINSIC VALUE Refers to the amount by which an option is IN THE MONEY
14 Options Contracts The Cost of Using Options The Cost of Using Options Using options has a cost Represents the market price of a particular option at a particular time Must be paid in cash in advance of purchasing the option contract Options typically cost between 3-8% of the underlying contract value The cost of an option will depend on the price that you wish to protect; the length of time that you wish to have the protection for; and the current level of volatility in the coffee market
15 Options Contracts Options Premiums Options Premiums are determined by: 1. Underlying market price of coffee 2. Exercise or strike price 3. Term to option maturity 4. Marketplace volatility 5. Short term rates Mathematical calculation on the possibility that at some time in the future the option will be exercisable
16 Options Contracts Advantages and Limitations of Using Options BENEFITS Allows strategic sales decisions Provides price protection & peace of mind Allows greater access to credits (less risky financial situation) Costs involved are limited and known upfront RISKS & CONSTRAINTS BASIS Risk is not covered Requires significant managerial commitment ie, learning and ongoing administration Doesn t solve all commodity risks
17 Options Contracts Summary An option contract is an agreement in which a seller conveys to a buyer of a contract the right, but not the obligation, to buy or sell a specific quantity of something at a specified price on or before a specified date Options have an upfront cost the premium Call options give the buyer the right to BUY the underlying asset by certain date at a certain price Put options give the buyer the right to SELL the underlying asset by a certain date at a certain price Options contracts are not perfect as they have an upfront cost and are subject to basis risk
Hedging. with. Wheat Options
Hedging with Wheat Options Minneapolis Grain Exchange 1 TYPES OF OPTIONS Put Option: the right to SELL a futures contract at a fixed price before an expiration date Call Option: the right to BUY a futures
More informationTable of Contents. Introduction
Table of Contents Option Terminology 2 The Concept of Options 4 How Do I Incorporate Options into My Marketing Plan? 7 Establishing a Minimum Sale Price for Your Livestock Buying Put Options 11 Establishing
More informationAppendix to Supplement: What Determines Prices in the Futures and Options Markets?
Appendix to Supplement: What Determines Prices in the Futures and Options Markets? 0 ne probably does need to be a rocket scientist to figure out the latest wrinkles in the pricing formulas used by professionals
More informationHEDGING WITH FUTURES AND BASIS
Futures & Options 1 Introduction The more producer know about the markets, the better equipped producer will be, based on current market conditions and your specific objectives, to decide whether to use
More informationStrike prices are listed at predetermined price levels for each commodity: every 25 cents for soybeans, and 10 cents for corn.
Types of Options If you buy an option to buy futures, you own a call option. If you buy an option to sell futures, you own a put option. Call and put options are separate and distinct options. Calls and
More informationRisk Management Using Derivatives Securities
Risk Management Using Derivatives Securities 1 Definition of Derivatives A derivative is a financial instrument whose value is derived from the price of a more basic asset called the underlying asset.
More informationAppendix A Glossary of Terms
Appendix A Glossary of Terms At-the-Money: A term used to describe a put or call option with a strike price that is equal to the current market price of the underlying futures contract. An at-the-money
More informationEducation Pack. Options 21
Education Pack Options 21 What does the free education pack contain?... 3 Who is this information aimed at?... 3 Can I share it with my friends?... 3 What is an option?... 4 Definition of an option...
More informationIntroduction to Futures & Options Markets for Livestock
Introduction to Futures & Options Markets for Livestock Kevin McNew Montana State University Marketing Your Cattle Marketing: knowing when and how to price your cattle. When Prior to sale At time of sale
More informationOutline. Commodity Risk Management Group. Microeconomic Problems of Commodity Price Volatility. Macroeconomic Problems of Commodity Price Volatility
Commodity Risk Management Group Panos Varangis / Julie Dana CRM, The World Bank Outline Price Risk Management Problems Background of Project Activities Lessons Learned Presentation to ICAC Research Associates
More informationChapter 15. Learning Objectives & Agenda. Economic Benefits Provided by. Options. Options
Chapter 1 Options Learning Objectives & Agenda Understand what are call and put options. Understand what are options contracts and how they can be used to reduce risk. Understand call-put parity. Understand
More informationIntroduction to Futures & Options Markets
Introduction to Futures & Options Markets Kevin McNew Montana State University Marketing Your Crop Marketing: knowing when and how to price your crop. When Planting Pre-Harvest Harvest Post-Harvest How
More informationQ&A, 10/08/03. To buy and sell options do we need to contact the broker or can it be dome from programs like Bloomberg?
Q&A, 10/08/03 Dear Students, Thanks for asking these great questions! The answer to my question (what is a put) I you all got right: put is an option contract giving you the right to sell. Here are the
More informationHISTORIC LAUNCH OF COMMODITY OPTIONS ON GOLD FUTURES
HISTORIC LAUNCH OF COMMODITY OPTIONS ON GOLD FUTURES 17 October 2017 research@bmastock.com 033 40110063 Gold Options- Contract Specification Gold Options- A Game Changer Commencement of Gold Option Contract
More informationForex, Futures & Option Basics: Chicago-NW Burbs Trading Club. Nick Fosco Sep 1, 2012
Forex, Futures & Option Basics: Chicago-NW Burbs Trading Club Nick Fosco Sep 1, 2012 Agenda: Forex Market Futures Market Options Part 1 Networking Break Options Part 2 Forex Market Currency pair trading
More informationOPTION MARKETS AND CONTRACTS
NP = Notional Principal RFR = Risk Free Rate 2013, Study Session # 17, Reading # 63 OPTION MARKETS AND CONTRACTS S = Stock Price (Current) X = Strike Price/Exercise Price 1 63.a Option Contract A contract
More informationMerchandisers Corner. By Diana Klemme, Vice President, Grain Service Corp., Atlanta, GA
Merchandisers Corner Photo courtesy of the Chicago Board of Trade By Diana Klemme, Vice President, Grain Service Corp., Atlanta, GA Most people hate buying insurance; it means paying premiums with little
More informationChapter 20: Financial Options
Chapter 20: Financial Options-1 Chapter 20: Financial Options I. Options Basics A. Understanding Option Contracts 1. Quick overview Option: an option gives the holder the right to buy or sell some asset
More informationOptions. Investment Management. Fall 2005
Investment Management Fall 2005 A call option gives its holder the right to buy a security at a pre-specified price, called the strike price, before a pre-specified date, called the expiry date. A put
More informationIntroduction and Application of Futures and Options
CHAPTER 5 Introduction and Application of Futures and Options Introduction to Futures Futures Terminology Introduction to Options Option Terminology Index Derivatives Application of Futures Application
More informationDefinitions of Marketing Terms
E-472 RM2-32.0 11-08 Risk Management Definitions of Marketing Terms Dean McCorkle and Kevin Dhuyvetter* Cash Market Cash marketing basis the difference between a cash price and a futures price of a particular
More informationStrike Bid Ask Strike Bid Ask # # # # Expected Price($)
1 Exercises on Stock Options The price of XYZ stock is $201.09, and the bid/ask prices of call and put options on this stock which expire in two months are shown below (all in dollars). Call Options Put
More informationABN Issue Date: 3 April 2018
GLOBAL PRIME PRODUCTS - PRODUCT DISCLOSURE STATEMENT Global Prime Pty Limited ABN 74 146 086 017 Australian Financial Services Licence No. 385 620 Issue Date: 3 April 2018 Global Prime Pty Ltd A:Level
More informationA GLOSSARY OF FINANCIAL TERMS MICHAEL J. SHARPE, MATHEMATICS DEPARTMENT, UCSD
A GLOSSARY OF FINANCIAL TERMS MICHAEL J. SHARPE, MATHEMATICS DEPARTMENT, UCSD 1. INTRODUCTION This document lays out some of the basic definitions of terms used in financial markets. First of all, the
More informationAGRICULTURAL PRODUCTS. Soybean Crush Reference Guide
AGRICULTURAL PRODUCTS Soybean Crush Reference Guide As the world s largest and most diverse derivatives marketplace, CME Group (cmegroup.com) is where the world comes to manage risk. CME Group exchanges
More information12 Bounds. on Option Prices. Answers to Questions and Problems
12 Bounds on Option Prices 90 Answers to Questions and Problems 1. What is the maximum theoretical value for a call? Under what conditions does a call reach this maximum value? Explain. The highest price
More informationA PRIMER ON UNDERSTANDING FUTURES AND OPTIONS MARKETS IN GRAIN MARKETING
A PRIMER ON UNDERSTANDING FUTURES AND OPTIONS MARKETS IN GRAIN MARKETING An Introduction to Financial and Marketing Tools for WA Wheat Growers Coulee City, Washington February 2, 1999 Larry D. Makus College
More informationChapter 17. Options and Corporate Finance. Key Concepts and Skills
Chapter 17 Options and Corporate Finance Prof. Durham Key Concepts and Skills Understand option terminology Be able to determine option payoffs and profits Understand the major determinants of option prices
More informationIntroduction to Financial Engineering
Introduction to Financial Engineering What is Financial Engineering (FE)? The discipline of financial engineering includes applications of mathematical, statistical modeling and computational technology
More informationHull, Options, Futures & Other Derivatives
P1.T3. Financial Markets & Products Hull, Options, Futures & Other Derivatives Bionic Turtle FRM Study Notes Sample By David Harper, CFA FRM CIPM and Deepa Raju www.bionicturtle.com Hull, Chapter 1: Introduction
More informationLecture 5. Trading With Portfolios. 5.1 Portfolio. How Can I Sell Something I Don t Own?
Lecture 5 Trading With Portfolios How Can I Sell Something I Don t Own? Often market participants will wish to take negative positions in the stock price, that is to say they will look to profit when the
More informationThe Minimum Price Contract
The Minimum Price Contract Purpose of a Minimum Price Contract Minimum price contracts are one of the marketing tools available to producers to help them cope with decreases in farm program support, price
More informationMidterm Exam (20 points) Determine whether each of the statements below is True or False:
Econ 353 Money, Banking, and Financial Institutions Spring 2006 Midterm Exam 2 Name The duration of the exam is 1 hour 20 minutes. The exam consists of 10 problems and it is worth 100 points. Please write
More informationEquity Derivatives Examination Series VIII
National Institute of Securities Market MoneyMakers Institute of Financial Markets Equity Derivatives Examination Series VIII Q1. The Option price is the. a) price paid by the seller of option to the buyer
More informationRisks, Markets and Contracts. Daniel Kirschen The University of Manchester
Risks, Markets and Contracts Daniel Kirschen The University of Manchester Concept of Risk Future is uncertain Uncertainty translates into risk In this case, risk of loss of income Risk = probability x
More informationEC Grain Pricing Alternatives
University of Nebraska - Lincoln DigitalCommons@University of Nebraska - Lincoln Historical Materials from University of Nebraska- Lincoln Extension Extension 1977 EC77-868 Grain Pricing Alternatives Lynn
More informationOptions Trading in Agricultural Commodities
EC-613 Cooperative Extension Service Purdue University West Lafayette, IN 47907 Options Trading in Agricultural Commodities Steven.P Erickson, Associate Professor Christopher A. Hurt, Assistant Professor
More informationDerivatives. Mechanics of Options Markets
Derivatives Mechanics of Options Markets Types of Option Types A call option gives the holder of the option the right to buy an asset by a certain date for a certain price A put option gives the holder
More informationFinancial instruments and related risks
Financial instruments and related risks Foreign exchange products Money Market products Capital Market products Interest Rate products Equity products Version 1.0 August 2007 Index Introduction... 1 Definitions...
More informationAdvanced Corporate Finance. 5. Options (a refresher)
Advanced Corporate Finance 5. Options (a refresher) Objectives of the session 1. Define options (calls and puts) 2. Analyze terminal payoff 3. Define basic strategies 4. Binomial option pricing model 5.
More informationLecture 1 Definitions from finance
Lecture 1 s from finance Financial market instruments can be divided into two types. There are the underlying stocks shares, bonds, commodities, foreign currencies; and their derivatives, claims that promise
More informationManaging Feed and Milk Price Risk: Futures Markets and Insurance Alternatives
Managing Feed and Milk Price Risk: Futures Markets and Insurance Alternatives Dillon M. Feuz Department of Applied Economics Utah State University 3530 Old Main Hill Logan, UT 84322-3530 435-797-2296 dillon.feuz@usu.edu
More informationGLOSSARY OF OPTION TERMS
ALL OR NONE (AON) ORDER An order in which the quantity must be completely filled or it will be canceled. AMERICAN-STYLE OPTION A call or put option contract that can be exercised at any time before the
More informationDISCLOSURE DOCUMENT FOR COMMODITY FUTURES CONTRACTS, FOR OPTIONS TRADED ON A RECOGNIZED MARKET AND FOR EXCHANGE-TRADED COMMODITY FUTURES OPTIONS
POLICY STATEMENT Q-22 DISCLOSURE DOCUMENT FOR COMMODITY FUTURES CONTRACTS, FOR OPTIONS TRADED ON A RECOGNIZED MARKET AND FOR EXCHANGE-TRADED COMMODITY FUTURES OPTIONS 1. In the case of commodity futures
More informationLecture 6 An introduction to European put options. Moneyness.
Lecture: 6 Course: M339D/M389D - Intro to Financial Math Page: 1 of 5 University of Texas at Austin Lecture 6 An introduction to European put options. Moneyness. 6.1. Put options. A put option gives the
More informationTHE PUTS, THE CALLS AND THE DREADED SELECT ALLs
CIMA P3 SECTION D MANAGING FINANCIAL RISK THE PUTS, THE CALLS AND THE DREADED SELECT ALLs Example long form to OT approach Here is my favourite long form question on Interest rate risk management: Assume
More informationForwards, Futures, Options and Swaps
Forwards, Futures, Options and Swaps A derivative asset is any asset whose payoff, price or value depends on the payoff, price or value of another asset. The underlying or primitive asset may be almost
More informationB. Maddah ENMG 625 Financial Eng g II 07/07/09
B. Maddah ENMG 625 Financial Eng g II 7/7/9 Chapter 12 Basic Option Theory (1) Option basics An option is the right, but not the obligation, to sell or buy an asset at specific terms. E.g., the option
More informationECON 337 Agricultural Marketing Spring Exam I. Answer each of the following questions by circling True or False (2 point each).
Name: KEY ECON 337 Agricultural Marketing Spring 2014 Exam I Answer each of the following questions by circling True or False (2 point each). 1. True False Futures and options contracts have flexible sizes
More informationAGRICULTURAL DERIVATIVES
AGRICULTURAL DERIVATIVES Key Information Document (KID) 2018 JSE Limited Reg No: 2005/022939/06 Member of the World Federation of Exchanges Page 1 of 6 PURPOSE This document provides you with key information
More informationCALL OPTION If you are the buyer of the CALL option, you are bullish the market
CALL OPTION If you are the buyer of the CALL option, you are bullish the market You bought a--sept---call option at this strike price--- 3.50---for this purchase price/premium of---20 ---that expire on---aug
More informationCredits And Debits. Learning How to Use Credit Spread Strategies
Credits And Debits Learning How to Use Credit Spread Strategies Neither Better Trades or any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain
More informationOPTIONS STRATEGY QUICK GUIDE
OPTIONS STRATEGY QUICK GUIDE OPTIONS STRATEGY QUICK GUIDE Trading options is a way for investors to take advantage of nearly any market condition. The strategies in this guide will let you trade, generate
More informationCorporate Finance, Module 21: Option Valuation. Practice Problems. (The attached PDF file has better formatting.) Updated: July 7, 2005
Corporate Finance, Module 21: Option Valuation Practice Problems (The attached PDF file has better formatting.) Updated: July 7, 2005 {This posting has more information than is needed for the corporate
More informationFAQ Research and Education
FAQ Research and Education 1. What is commodity? Ans. Commodity is a basic good which is either extracted from nature or produced through cultivation, industrial means. These commodities are fungible and
More informationEcon 337 Spring 2015 Due 10am 100 points possible
Econ 337 Spring 2015 Final Due 5/4/2015 @ 10am 100 points possible Fill in the blanks (2 points each) 1. Basis = price price 2. A bear thinks prices will. 3. A bull thinks prices will. 4. are willing to
More informationGetting Started with Options. Jump start your portfolio by learning options. OptionsElitePicks.com
Getting Started with Options Jump start your portfolio by learning options OptionsElitePicks.com Your First Options Trade Let s walk through a simple options trade. For this walk through, I m going to
More informationECO OPTIONS AND FUTURES SPRING Options
ECO-30004 OPTIONS AND FUTURES SPRING 2008 Options These notes describe the payoffs to European and American put and call options the so-called plain vanilla options. We consider the payoffs to these options
More informationOptions 101: The building blocks
PORTFOLIO DISCUSSION J.P. MORGAN U.S. EQUITY GROUP October 2013 Connecting you with our global network of investment professionals IN BRIEF This paper provides an overview of options and describes strategies
More informationTable of Contents Activity Table
Table of Contents Chapter #1: Successful Market Planning... 1 Chapter #2: Futures Price Movements... 4 Chapter #3: Basis Movements... 10 Chapter #4: Using Crop Marketing Contracts... 13 Chapter #5: Carrying
More informationCommodity Options : Gold, Crude, Copper, Silver
Commodity Options : Gold, Crude, Copper, Silver WHY OPTIONS? An option contract offers the best of both worlds. It will offer the buyer of the contract protection if the price of the underlying moves against
More information1
1 2 3 4 5 6 7 8 9 Who Should Consider Using Covered Calls? An investor who is neutral to moderately bullish on some of the equities in his portfolio. An investor who is willing to limit his upside potential
More informationCall Options - Outline
Call Options - Outline 1 B.1.1 Call Options - Part 1 Quick Review of a Long Forward Call Option Details To Exercise or Not To Exercise Purchased Call Payoff Exercises B.1.1 Call Options - Part 1 1 / 9
More informationDiagnostic Test F4E - September :45-15:30 (the formula sheet is handed out separately)
Diagnostic Test F4E - September 22 2017 13:45-15:30 (the formula sheet is handed out separately) Mention your name, student number and course-code category (IEM / BIT / PREM ) at all sheets you hand in.
More informationEcon 337 Spring 2014 Due 10am 100 points possible
Econ 337 Spring 2014 Final Due 5/7/2014 @ 10am 100 points possible Fill in the blanks (2 points each) 1. Price discovery is the process by which and arrive at a specific price for a given lot of produce
More informationSteve Meizinger. FX Options Strategies for Your Investment Portfolio
Steve Meizinger FX Options Strategies for Your Investment Portfolio For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations,
More informationFUTURES CONTRACTS AND FUTURES OPTION CONTRACTS
CLIENT SERVICE AGREEMENT Halifax New Zealand Limited Client Service Agreement Product Disclosure Statement for FUTURES CONTRACTS AND FUTURES OPTION CONTRACTS Halifax New Zealand Limited Financial Services
More informationProtecting equity gains through options
For Financial Intermediaries, Institutional and Consultant use only. Not for redistribution under any circumstances. Protecting equity gains through options Portfolio Solutions Team We examine how vanilla
More informationECON 337 Agricultural Marketing. Spring Exam I. Due April 16, Start of Lab (or before)
Name: KEY ECON 337 Agricultural Marketing Spring 2013 Exam I Due April 16, 2013 @ Start of Lab (or before) Answer each of the following questions by circling True or False (2 points each). 1. True False
More information1. On Jan. 28, 2011, the February 2011 live cattle futures price was $ per hundredweight.
Econ 339X Spring 2011 Homework Due 2/8/2011 65 points possible Short answer (two points each): 1. On Jan. 28, 2011, the February 2011 live cattle futures price was $107.50 per hundredweight. If the cash
More informationMarkets with Intermediaries
Markets with Intermediaries Episode Baochun Li Professor Department of Electrical and Computer Engineering University of Toronto Network Models of Markets with Intermediaries (Chapter ) Who sets the prices?
More informationBASICS OF COMPETITIVE MARKETS FOR ELECTRICITY AUCTIONS - INTENT AUCTIONS - COMPONENTS. Basic Definitions Transactions Futures
BASICS OF COMPETITIVE MARKETS FOR ELECTRICITY Basic Definitions Transactions Futures 3/6/2003 copyright 1996 Gerald B. Sheble' 1 AUCTIONS - INTENT Open Exchange on a Common Product Open Knowledge on Price
More informationMarkets with Intermediaries
Markets with Intermediaries Part III: Dynamics Episode Baochun Li Department of Electrical and Computer Engineering University of Toronto Required reading: Networks, Crowds, and Markets, Chapter..5 Who
More informationBINARY OPTIONS: A SMARTER WAY TO TRADE THE WORLD'S MARKETS NADEX.COM
BINARY OPTIONS: A SMARTER WAY TO TRADE THE WORLD'S MARKETS NADEX.COM CONTENTS To Be or Not To Be? That s a Binary Question Who Sets a Binary Option's Price? And How? Price Reflects Probability Actually,
More informationTrader s Guide to Credit Spreads
Trader s Guide to Credit Spreads Options Money Maker, LLC Mark Dannenberg mark@optionsmoneymaker.com www.optionsmoneymaker.com About the Author Mark Dannenberg is an options industry veteran with over
More informationFinancial Derivatives
Derivatives in ALM Financial Derivatives Swaps Hedge Contracts Forward Rate Agreements Futures Options Caps, Floors and Collars Swaps Agreement between two counterparties to exchange the cash flows. Cash
More informationFinancial Instruments: basic definitions and derivatives
Risk and Accounting Financial Instruments: basic definitions and derivatives Marco Venuti 2018 Agenda Overview Definition of Financial Instrument Definition of Financial Asset Definition of Financial liability
More informationThe Collar Strategy. Also known as a hedge wrap. Involves a combination of two strategies: Covered call Protective put
The Collar Strategy The Collar Strategy Also known as a hedge wrap. Involves a combination of two strategies: Covered call Protective put The Collar Strategy Ownership of the underlying security Sale of
More informationOptiontradingpedia.com Options Trading Basics Quiz (1)
Optiontradingpedia.com Options Trading Basics Quiz (1) Answers Sheet Please take note that the answers in the quiz may not be presented in the order listed below. This quiz covers the following topics:
More informationExamples of Derivative Securities: Futures Contracts
Finance Derivative Securities Lecture 1 Introduction to Derivatives Examples of Derivative Securities: Futures Contracts Agreement made today to: Buy 5000 bushels of wheat @ US$4.50/bushel on December
More informationPURPOSE OF AN INVERTED CREDIT SPREAD
1 PURPOSE OF AN INVERTED CREDIT SPREAD The purpose of an Inverted Credit Spread is to extend duration on an iron fly or iron condor in order to hold the trade longer, lower the trade basis and turn a losing
More informationA Beginners Guide To Making Money Trading Binary Options
A Beginners Guide To Making Money Trading Binary Options What Are Binary Options? A binary option has now become a fairly common term amongst traders. A Binary Option deals with a kind of purchased asset
More informationProduct Disclosure Statement
PART L Product Disclosure Statement AFS Licence No. 297950 Date of issue: 21 June 2016 D2MX Pty Ltd () Level 36, 50 Bridge Street Sydney NSW 2000 A Participant of ASX Group D2MX Pty Ltd AFSL no. 297950
More informationGRAIN MARKETING ALTERNATIVES USING FUTURES AND OPTIONS
GRAIN MARKETING ALTERNATIVES USING FUTURES AND OPTIONS An Introduction to Financial and Marketing Tools for WA Wheat Growers Coulee City, Washington February 2, 1999 Larry D. Makus College of Agriculture
More informationUniversity of Texas at Austin. HW Assignment 3
HW: 3 Course: M339D/M389D - Intro to Financial Math Page: 1 of 5 University of Texas at Austin HW Assignment 3 Contents 3.1. European puts. 1 3.2. Parallels between put options and classical insurance
More informationEducating People To Help Themselves
COOPERATIVE EXTENSION SERVICE UNIVERSITY OF MARYLAND, COLLEGE PARK UNIVERSITY OF MARYLAND EASTERN SHORE UNIVERSITY OF MARYLAND COLLEGE PARK UNIVERSITY OF MARYLAND EASTER N SH ORE Futures and Options: Graphically
More informationLONG-TERM EQUITY ANTICIPATION SECURITIES
LEAPS September 2000 LONG-TERM EQUITY ANTICIPATION SECURITIES Table of Contents Contents Page(s) Introduction 3 Benefits and Risks to Investors 4 Buying and Selling LEAPS 6 Strategies 7 Index LEAPS 11
More informationDetermining Exchange Rates. Determining Exchange Rates
Determining Exchange Rates Determining Exchange Rates Chapter Objectives To explain how exchange rate movements are measured; To explain how the equilibrium exchange rate is determined; and To examine
More informationLecture 3: Interest Rate Forwards and Options
Lecture 3: Interest Rate Forwards and Options 01135532: Financial Instrument and Innovation Nattawut Jenwittayaroje, Ph.D., CFA NIDA Business School 1 Forward Rate Agreements (FRAs) Definition A forward
More informationCHAPTER 17 OPTIONS AND CORPORATE FINANCE
CHAPTER 17 OPTIONS AND CORPORATE FINANCE Answers to Concept Questions 1. A call option confers the right, without the obligation, to buy an asset at a given price on or before a given date. A put option
More informationAS/ECON 2350 S2 N Answers to Mid term Exam July time : 1 hour. Do all 4 questions. All count equally.
AS/ECON 2350 S2 N Answers to Mid term Exam July 2017 time : 1 hour Do all 4 questions. All count equally. Q1. Monopoly is inefficient because the monopoly s owner makes high profits, and the monopoly s
More informationEconomics 502 April 3, 2008
Second Midterm Answers Prof. Steven Williams Economics 502 April 3, 2008 A full answer is expected: show your work and your reasoning. You can assume that "equilibrium" refers to pure strategies unless
More informationForeign Exchange Risk. Foreign Exchange Risk. Risks from International Investments. Foreign Exchange Transactions. Topics
Foreign Exchange Risk Topics Foreign Exchange Risk Foreign Exchange Exposure Financial Derivatives Forwards Futures Options Risks from International Investments Additional Risks Political Risk: Uncertainty
More information1. A put option contains the right to a futures contract. 2. A call option contains the right to a futures contract.
Econ 337 Name Midterm Spring 2017 100 points possible 3/28/2017 Fill in the blanks (2 points each) 1. A put option contains the right to a futures contract. 2. A call option contains the right to a futures
More informationCopyright 2015 by IntraDay Capital Management Ltd. (IDC)
Copyright 2015 by IntraDay Capital Management Ltd. (IDC) All content included in this book, such as text, graphics, logos, images, data compilation etc. are the property of IDC. This book or any part thereof
More informationName: MULTIPLE CHOICE. 1 (5) a b c d e. 2 (5) a b c d e TRUE/FALSE 1 (2) TRUE FALSE. 3 (5) a b c d e 2 (2) TRUE FALSE.
Name: M339D=M389D Introduction to Actuarial Financial Mathematics University of Texas at Austin Sample Midterm Exam - Solutions Instructor: Milica Čudina Notes: This is a closed book and closed notes exam.
More informationAveraging solutions. A guide to trading and hedging average prices on the London Metal Exchange SETTING THE GLOBAL STANDARD
Averaging solutions A guide to trading and hedging average prices on the London Metal Exchange SETTING THE GLOBAL STANDARD Averaging solutions The world s metal community often negotiate physical deals
More informationHull, Options, Futures & Other Derivatives, 9th Edition
P1.T3. Financial Markets & Products Hull, Options, Futures & Other Derivatives, 9th Edition Bionic Turtle FRM Study Notes Reading 19 By David Harper, CFA FRM CIPM www.bionicturtle.com HULL, CHAPTER 1:
More informationNAVIGATING. a BriEF guide to the DErivativEs MarkEtPLaCE and its role in EnaBLing ECOnOMiC growth
NAVIGATING a BriEF guide to the DErivativEs MarkEtPLaCE and its role in EnaBLing ECOnOMiC growth p 1 OVERVIEW What does risk look like p 14 THE BIG ECONOMIC PICTURE A quick lesson in supply and demand
More informationLEAPS. Long-term Equity AnticiPation Securities TM. How to put your long-term market opinions to work with LEAPS
LEAPS Long-term Equity AnticiPation Securities TM How to put your long-term market opinions to work with LEAPS The Chicago Board Options Exchange (CBOE) is the world s largest options marketplace and one
More information