Class Participation

Date: 10th February, 2023

Name: Sankalp Mishra (BD22092)
Section: C

1. While explaining the Call options graph, sir pointed out that profit happens when spot
price becomes greater than strike price.
My participation: I mentioned that the contract premium should also be taken into
consideration while calculating profit. Hence profit should be ‘Spot price – Strike price –
Premium’
Faculty’s response: The faculty agreed to my point.

2. While explaining the American and European style contracts

My participation: I questioned whether the option holder has the power to decide whether
the contract will be American style or European style.
Faculty’s response: The contract style is predetermined by the contract writer.

Class Summary:

1. In Deep out of the money and deep in the money contracts, extrinsic value will decline in
these contracts because the parties involved have already decided that the pricing won't
move much in the future.
2. Unlike American contracts, which can be exercised at any point during the contract,
European contracts can only be executed on the date of maturity. With the exception of the
time component, all the variables are the same for both types of contracts.
3. Asian options are those in which the strike price is compared to the average price over a
period of more than 20 days rather than the current price.
4. In contrast to unsystematic risks, which are firm level risks that are specific to the firm and
have an impact on stock prices through events like CEO changes, annual results, product
launches, etc., systemic risks are market level factors that have an impact on the stock price
of any company, such as inflation or governance.