Chapter 17: Futures and Options Flashcards
Futures contract
Standardised, exchange-traded contract to buy or sell an asset on an agreed basis in the future.
Long position
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.
Option premium
This is the price paid for the option, by the option holder, to the option writer.
Put option
The right - but not the obligation - to sell a specified asset at a specified price on a set date / dates in the future.
Exercise / strike price
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.
Traded option
Traded options are option contracts with standardised features, actively traded on organised exchanges.
Warrant
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.
American option
An option that can be exercised on any date before its expiry.