Identify the following terms about an option on common stock

a. Call option the right to purchase a specified number of shares of common stock at a specified price (the exercise or strike price) until, or on, a specified date (the expiration date).

b. Put option the right to sell (i.e., force someone to buy) a specified number of shares of common stock at a specified price (the exercise or strike price) until, or on, a specified date (the expiration date).

c. Exercise price the price at which shares may be bought or sold using an option.

d. Expiration date the last date on which the option is valid.

e. “In the money” an option which gives its holder the right to purchase shares (if a call) for less than their market price or to sell shares (if a put) for more than their market price. If used, this option would result in an immediate gain in value.

f. “Out of the money” an option which gives its holder the right to purchase shares (if a call) for more than their market price or to sell shares (if a put) for less than their market price. If used, this option would result in an immediate loss of value.

Be the first to comment on "Identify the following terms about an option on common stock"

Leave a comment

Your email address will not be published.


*


This site uses Akismet to reduce spam. Learn how your comment data is processed.