Chapter 15 Flashcards
Non-Equity Options
Broad-based index
composed of stocks that reflects the performance of the entire market
Narrow-based index
composed of stocks that reflects the performance of a particular market segment or industry group
Equity Options:
- Underlying Asset
- Multiplier
- Exercise
- Settlement
Underlying Asset: Stock
Multiplier: 100 shares
Exercise: Receive or deliver stock
Settlement: Two business days
Index Options:
- Underlying Asset
- Multiplier
- Exercise
- Settlement
Underlying Asset: Value or average of an index
Multiplier: 100 dollars
Exercise: Receive or deliver cash
Settlement: One business day
The Interbank Market
- Where foreign exchange rates are established
- occur between commercial banks
- decentralized and unregulated
- unlimited trading hours
Spot Transactions
- Settle in two business days after settlement date
- majority of transactions done this way
- exchange rate commonly referred to as spot rate or spot price
Forward Transactions
Settle in more than two business days
Spot Rate
- exchange rate
- current market price for the cash currency
- Fed Reserve Board will disseminate closing spot prices for different foreign currencies on a daily basis
PHLX
Philadelphia Stock Exchange
- 9:30am to 4:00pm
- Issued and cleared by OCC (Options Clearing Corp)
Foreign Currency Options:
- Expiration
- Exercise
- Contract size
- Point value
Expiration: The third Friday of the expiration month
Exercise: US dollar-settle, European style exercise
Contract size: 10,000 units, except Yen which is 1 million
Point value: 1 point=$100
