Chapter 17: Futures and Options Flashcards

1
Q

Futures contract

A

Standardised, exchange-traded contract to buy or sell an asset on an agreed basis in the future.

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2
Q

Long position

A

Having an economic exposure to the asset.

In futures and forward agreements, the long party is the party that has contracted to take delivery of the asset in the future.

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3
Q

Option premium

A

This is the price paid for the option, by the option holder, to the option writer.

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4
Q

Put option

A

The right - but not the obligation - to sell a specified asset at a specified price on a set date / dates in the future.

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5
Q

Exercise / strike price

A

The price at which an underlying security can be sold to (for a put), or purchased from (for a call) the writer / issuer of an option.

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6
Q

Traded option

A

Traded options are option contracts with standardised features, actively traded on organised exchanges.

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7
Q

Warrant

A

An option issued by a company over its own shares.

The holder has the right to purchase shares at a specified price at specified times in the future from the company.

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8
Q

American option

A

An option that can be exercised on any date before its expiry.

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