Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
41 Cards in this Set
- Front
- Back
What are the two types of Options |
Calls and Puts |
|
What are the classes of options |
All calls of one issuer or all puts of one issuer are considered a class of an option |
|
With regard to options, what is a series |
All options of one issuer with the same class, exercise price, and expiration month |
|
What are the two styles of options |
American- Style European Style |
|
Nearly all equity options are conducted in what style? |
American Style |
|
What are the 3 equivalent terms for a buyer of an option |
Long Holder Owner |
|
What are the 2 equivalent terms for the seller of an options |
Short Writer |
|
What can be the underlying instrument in an options contract? |
Anything with fluctuating value. |
|
What are the three specifications of an options contract? |
Underlying Instruments Price Expatriation |
|
What is a Long call |
The right to buy 100 shares of a specific stock at the strike price before the expiration, if he chooses to exercise that right |
|
What is a Short call |
The obligation to sell 100 shares of a specific stock at the strike price if the buyer exercises the contract |
|
What is a Long Put |
The right to sell 100 shares of a specific stock at the strike price before the expiration if he chooses to exercise the contract |
|
What is a short Put |
The obligation to buy 100 shares of a specific stock at the strike price before the expiration if he chooses to exercise the contract |
|
The buyer of an option wins when? |
The option to be exercised |
|
The seller of an option wins when? |
The option expires |
|
What is the market attitude of a call buyer? |
Bullish |
|
What is the market attitude of a call writer? |
Bearish |
|
What is the market attitude of a put buyer? |
Bearish |
|
What is the market attitude of a put writer? |
Bullish |
|
What is the definition of "In the money" for a both long and short calls |
A call is in the money when the market price is GREATER than the strike price. |
|
What is the definition of "At the money" for a both long and short calls |
A call is at the money when the market price equals the strike price |
|
What is the definition of "Out of the money" for a both long and short calls |
A call is out of the money when the market price is LOWER than the strike price |
|
What is the definition of "Intrinsic Value" for a both long and short calls |
Intrinsic Value is the in the money amount, a call has intrinsic value when the market value is above the strike price |
|
For options that are at the money or out of the money, what is there intrinsic value? |
$0 |
|
What is the definition of "Parity" for a both long and short calls |
When the premium is equal to intrinsic value |
|
For calls, how do you determine the break even point? |
The strike price plus the premium |
|
For calls how do you determine the Intrinsic Value |
Strike price - Market Price |
|
What is the definition of "In the Money" for both long and short Puts |
A put is in the money when the market price is lower than the strike price |
|
What is the definition of "at the money" for both long and short Puts |
A put is at the money when the market price equals the strike price |
|
What is the definition of "Out of the Money" for both long and short Puts |
A put is out of the money when the market price is higher than the strike price |
|
What is the definition of "intrinsic value" for both long and short Puts |
Intrinsic value is the at the money amount. A put has intrinsic value when the market price is below the strike price |
|
For long and short puts, how do you determine the intrinsic value |
Market Price - Strike Price |
|
For long and short puts, how do you determine the breakeven point |
Premium - Strike Price |
|
Maximum gain for a Call Buyer? |
Unlimited, the stock price can rise infinitely |
|
Maximum Loss for a Call Buyer |
The premium |
|
Maximum Gain for a Call Writer |
The premium |
|
Maximum Loss for a Call Writer |
Unlimited |
|
Maximum Gain for a Put buyer |
Options strike price - premium paid |
|
Maximum Loss for a Put Buyer |
Premium Paid |
|
Maximum gain for a Put Writer |
Premium received |
|
Maximum Loss for a Put Writer |
Put's strike price - premium, aka the break even. |