The Importance Of Option And European Options

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According to Hull, J (Options, Futures and other derivatives: page 7); Options are traded both on exchanges and in the over-the-counter markets. There are two types of option; there is a Call Option and Put Options. The Call Option gives the owner the ability to trade a specified amount of products at a fixed price; and the put option is option which gives the owner the right to sell the underlying asset by a certain date for a certain price. And there are styles of options: American Options and European Options. The American Options are options that can be used during their lifetimes; they can be used but only up to their expiration date. Therefore according to Investopedia, the American Option increases the value of the option to the holder …show more content…
And according to Jackson, D. S & al, with regard to customers, there are three important factors that need to be considered: whether the buyers perceive the product offers value, how many buyers there are, and how sensitive they are to changes in price. In addition to gathering data on the size of markets, companies must try to determine how price sensitive customers are. The company must be able to know if the customer will be able to buy the product at the price given. And also the way a competitor set the prices and sell the products will have a big effect on the company’s pricing decision. Let’s take a scenario where you want to buy a shirt for R400 at one store, but yet you find out that the same item is R50 less than the first store. Obviously one would go for cheaper. That’s why to keep competition; a company can give discount to customers so that they can maintain their loyalty. And the author also stated that whenever the economy is weak and many people are unemployed, companies often lower their prices. In international markets, currency exchange rates also affect pricing decisions. And also pricing decisions are affected by federal and state regulations. Regulations are designed to protect consumers, promote competition, and encourage ethical and fair behavior by

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