Professional Documents
Culture Documents
obligation to buy or sell a specific security, like stock on a predetermined date and
at a predetermined price (exercise price). One stock option contract typically
controls 100 shares of stock. Options are adjusted for stock splits but not cash
dividends.
Call buy (long right to buy; short obligation to sell)
Put Sell (long - ..to sell; short - ..buy)
European options exercised only at expiration date
American any time upto and including expiration date
At expiration, two are identical. At other times, different and may have diff values.
To acquire the rights owner pays option premium