http://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&feed=atom&action=historySOCR EduMaterials Activities ApplicationsActivities TradingOptions - Revision history2024-03-28T23:16:00ZRevision history for this page on the wikiMediaWiki 1.15.1http://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7963&oldid=prevIvoDinov: /* Description */2008-08-03T19:07:59Z<p><span class="autocomment">Description</span></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>You can access the <del class="diffchange diffchange-inline">Traiding</del>-Options applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>You can access the <ins class="diffchange diffchange-inline">Trading</ins>-Options applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.</div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Definition===</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Definition===</div></td></tr>
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</table>IvoDinovhttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7960&oldid=prevIvoDinov at 19:00, 3 August 20082008-08-03T19:00:58Z<p></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>You can access the <del class="diffchange diffchange-inline">portfolio </del>applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>You can access the <ins class="diffchange diffchange-inline">Traiding-Options </ins>applet at [http://www.socr.ucla.edu/htmls/app/ the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''.</div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Definition===</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Definition===</div></td></tr>
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</table>IvoDinovhttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7957&oldid=prevIvoDinov at 18:32, 3 August 20082008-08-03T18:32:02Z<p></p>
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<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>== Options <del class="diffchange diffchange-inline"> </del>==</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>== <ins class="diffchange diffchange-inline">[[SOCR_EduMaterials_ApplicationsActivities | SOCR Applications Activities]] - </ins>Options==</div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>===Description===</div></td></tr>
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</table>IvoDinovhttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7951&oldid=prevIvoDinov at 18:27, 3 August 20082008-08-03T18:27:20Z<p></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>== Options ==</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>== Options ==</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">* '''</del>Description<del class="diffchange diffchange-inline">''': </del>You can access the portfolio <del class="diffchange diffchange-inline">applets for the options trading strategies </del>at http://www.socr.ucla.edu/htmls/app/ .</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">===</ins>Description<ins class="diffchange diffchange-inline">===</ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>You can access the portfolio <ins class="diffchange diffchange-inline">applet </ins>at <ins class="diffchange diffchange-inline">[</ins>http://www.socr.ucla.edu/htmls/app/ <ins class="diffchange diffchange-inline">the SOCR Applications Site], select ''Financial Applications'' --> ''TraidingOptions''</ins>.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;">===Definition===</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>* Issuer (or seller), holder of a short position. He sells the option.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>* <ins class="diffchange diffchange-inline">'''</ins>Issuer<ins class="diffchange diffchange-inline">''' </ins>(or seller), holder of a short position. He sells the option.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>* Holder (buyer), holder of a long position. He buys the option.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>* <ins class="diffchange diffchange-inline">'''</ins>Holder<ins class="diffchange diffchange-inline">''' </ins>(buyer), holder of a long position. He buys the option.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">'''</del>Types of options<del class="diffchange diffchange-inline">:'''</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline"><br></del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">===</ins>Types of options<ins class="diffchange diffchange-inline">===</ins></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">* 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.</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>* <del class="diffchange diffchange-inline">Put </del>option: Gives the holder the right to <del class="diffchange diffchange-inline">sell </del>an asset by a certain date for a certain price called exercise price with a fee. This fee it is the price of the <del class="diffchange diffchange-inline">put </del>or premium<del class="diffchange diffchange-inline">.</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>* <ins class="diffchange diffchange-inline">'''Call </ins>option<ins class="diffchange diffchange-inline">'''</ins>: Gives the holder the right to <ins class="diffchange diffchange-inline">buy </ins>an asset by a certain date for a certain price called exercise price with a fee. This fee it is the price of the <ins class="diffchange diffchange-inline">option </ins>or premium.</div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">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</del>.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">There are European options (can be exercised only on </del>the <del class="diffchange diffchange-inline">expiration date) and American options (can be exercised at any time up </del>to the expiration date<del class="diffchange diffchange-inline">)</del>.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* '''Put option''': Gives </ins>the <ins class="diffchange diffchange-inline">holder the right </ins>to <ins class="diffchange diffchange-inline">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: </ins>the expiration date <ins class="diffchange diffchange-inline">or maturity date. The price specified it is called the exercise price or the strike price</ins>.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>''<del class="diffchange diffchange-inline">'Stock </del>options <del class="diffchange diffchange-inline">mechanics:</del>'''</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">There are </ins>''<ins class="diffchange diffchange-inline">European </ins>options'<ins class="diffchange diffchange-inline">' (can be exercised only on the expiration date) and ''American options</ins>'' <ins class="diffchange diffchange-inline">(can be exercised at any time up to the expiration date).</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;"></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;">===Stock options mechanics===</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>* 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>).</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>* 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>).</div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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.</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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.</div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><center>[[Image: Christou_bear_spread.jpg|600px]]</center></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><center>[[Image: Christou_bear_spread.jpg|600px]]</center></div></td></tr>
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<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline"><br> </del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">===References===</ins></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">* </del>The materials above was partially taken from <del class="diffchange diffchange-inline"><br></del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>The materials above was partially taken from<ins class="diffchange diffchange-inline">:</ins></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003<del class="diffchange diffchange-inline">, and <br></del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003<ins class="diffchange diffchange-inline">.</ins></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.</div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* [http://www.socr.ucla.edu/htmls/app/ SOCR Applications Site]</ins></div></td></tr>
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<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">{{translate|pageName=http://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions}}</ins></div></td></tr>
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</table>IvoDinovhttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7942&oldid=prevNchristo: /* Options */2008-08-03T16:18:40Z<p><span class="autocomment">Options</span></p>
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<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* The materials above was partially taken from <br></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">''Modern Portfolio Theory'' by Edwin J. Elton, Martin J. Gruber, Stephen J. Brown, and William N. Goetzmann, Sixth Edition, Wiley, 2003, and <br></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">''Options, Futues, and Other Derivatives'' by John C. Hull, Sixth Edition, Pearson Prentice Hall, 2006.</ins></div></td></tr>
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</table>Nchristohttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7919&oldid=prevNchristo: /* Options */2008-08-03T15:29:53Z<p><span class="autocomment">Options</span></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>== Options ==</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>== Options ==</div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;"></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;">* '''Description''': You can access the portfolio applets for the options trading strategies at http://www.socr.ucla.edu/htmls/app/ .</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td></tr>
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</table>Nchristohttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7917&oldid=prevNchristo: /* Options */2008-08-03T15:21:51Z<p><span class="autocomment">Options</span></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>'''Stock options mechanics:'''</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>'''Stock options mechanics:'''</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>* 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 <del class="diffchange diffchange-inline">$\</del>$0.50<del class="diffchange diffchange-inline">$</del>, the total premium for that option would be <math>\$50</math> (<math>0.50 \times 100 = \$50</math><del class="diffchange diffchange-inline">.</del>)</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div>* 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>)<ins class="diffchange diffchange-inline">.</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>* 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).</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>* 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).</div></td></tr>
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</table>Nchristohttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7916&oldid=prevNchristo: /* Options */2008-08-03T15:19:59Z<p><span class="autocomment">Options</span></p>
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<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><center>[[Image: <del class="diffchange diffchange-inline">Christou_butterflyl_calls</del>.jpg|600px]]</center></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><center>[[Image: <ins class="diffchange diffchange-inline">Christou_butterfly_calls</ins>.jpg|600px]]</center></div></td></tr>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
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</table>Nchristohttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7915&oldid=prevNchristo: /* Options */2008-08-03T15:18:47Z<p><span class="autocomment">Options</span></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">INSERT FIG 1</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline"><center>[[Image: Christou_call_faces.jpg|600px]]</center></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">INSERT FIG 2</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline"><center>[[Image: Christou_put_faces.jpg|600px]]</center></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins style="color: red; font-weight: bold; text-decoration: none;">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:</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">\noindent There is an infinite number of combinations that one can make using call and put options</del>. <del class="diffchange diffchange-inline"> 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:</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline"><br></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline"><center>[[Image: Christou_butterflyl_calls</ins>.<ins class="diffchange diffchange-inline">jpg|600px]]</center></ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del style="color: red; font-weight: bold; text-decoration: none;">INSERT FIG 3</del></div></td><td colspan="2"> </td></tr>
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<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div><del class="diffchange diffchange-inline">INSERT FIG 4</del></div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline"><center>[[Image: Christou_bear_spread.jpg|600px]]</center></ins></div></td></tr>
<tr><td colspan="2"> </td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div> </div></td></tr>
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</table>Nchristohttp://wiki.stat.ucla.edu/socr/index.php?title=SOCR_EduMaterials_Activities_ApplicationsActivities_TradingOptions&diff=7898&oldid=prevNchristo: /* Options */2008-08-03T07:18:15Z<p><span class="autocomment">Options</span></p>
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<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>An option is a contract between two investors: </div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>Issuer (or seller), holder of a short position. He sells the option.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>Issuer (or seller), holder of a short position. He sells the option.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>Holder (buyer), holder of a long position. He buys the option.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>Holder (buyer), holder of a long position. He buys the option.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>Types of options: </div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">'''</ins>Types of options:<ins class="diffchange diffchange-inline">'''</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>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.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>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.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>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.</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>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.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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.</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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.</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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).</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>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).</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>Stock options mechanics: </div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">'''</ins>Stock options mechanics:<ins class="diffchange diffchange-inline">'''</ins></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>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>.)</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>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>.)</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'>-</td><td style="background: #ffa; color:black; font-size: smaller;"><div>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).</div></td><td class='diff-marker'>+</td><td style="background: #cfc; color:black; font-size: smaller;"><div><ins class="diffchange diffchange-inline">* </ins>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).</div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div><br></div></td></tr>
<tr><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>Stock options expired on the Saturday immediately following the third Friday of the expiration month.</div></td><td class='diff-marker'> </td><td style="background: #eee; color:black; font-size: smaller;"><div>Stock options expired on the Saturday immediately following the third Friday of the expiration month.</div></td></tr>
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</table>Nchristo