英文版financeCh22s研讨.pptVIP

9.220 Chapter 22 - Options Options If you have an option, then you have the right to do something. I.e., you can make a decision or take some action. The option owner has a choice to make. Usually the choice can be made over time after more information is known. Having an option is valuable; options never have a negative value, because, at worst, the option owner can discard the option and not take any action. Option Writer The option writer is the person who created (or wrote) the option and then sold it to someone else. As the writer did not previously own the option, the act of writing and selling the option is equivalent to short-selling the option. The option writer has sold an option or right to the option owner. Thus the writer has taken on an obligation to act on the instruction of the option owner as specified by the option contract. When selling the option to the buyer, the writer receives as compensation the “option premium”= the price the buyer pays for the option. I’m “in the money” An option is said to be “in the money” if exercising it would produce a positive payoff. An “at the money” option would generate a zero payoff if exercised. An “out of the money” option would generate a negative payoff if exercised. (Thus an out of the money option would never be exercised.) Option Payoffs at Expiration It is useful to examine the payoffs of options when they are about to expire. At this point in time, the owner is forced to make the decision to exercise or to abandon the option. The option owner will exercise if the option is in the money when it is about to expire. Consider Call and Put Options… The Put-Call Parity Relationship* You purchase the BCE stock, the July $85 put option, and short sell the July $85 call option (both options are European). Your payoff at expiration in July (T): If ST = $100 If ST = $80 Stock (S) Put (P) Call(C) __ Total (Certain) Payoff: To calculate the PV of the certain payoff ($85=E) today, we use the risk-free rate: