Options fix PUTCALL PARITY Flashcards
Long Call (Definition)
Right, but not obligaion to buy at a strike price
Long Call (Max Profit and Loss)
infinite and FV(Premium)
Long Call (Position in Underlying Asset)
Long
Short Call (Definition)
Obligation to sell at strike price
Short Call (Max Profit and Loss)
FV(Premium) and infinite
Short Call (Position in Underlying Asset)
Short
Long Put (Definition)
Right to sell at the strike price
Long Put (Max Profit and Loss)
K - FV(Premium) and FV(Premium)
Long Put (Position in Underlying Asset)
Short
Short Put (Definition)
Obligation to buy at strike price
Short Put (Max Profit and Loss)
FV(Premium) and - K + FV(Premium)
Short Put (Position in Underlying Asset)
Long
European Option
Exercise option only at expiration date
American Option
Exercise anytime during the contract
Bermuda option
Exercise during specified periods
Option Writer
Seller of an option
in-the-money
would have a positive payoff if the option was exercised immediately
at-the-money
would have no payoff if the option was exercised immediately
out-of-the-money
would have a negative payoff if the option was exercised immediately
covered call
Buying the underlying asset and selling a call, so long in the asset and short in the call.
For example, let’s say that you own shares of the TSJ Sports Conglomerate and like its long-term prospects as well as its share price but feel in the shorter term the stock will likely trade relatively flat, perhaps within a few dollars of its current price of, say, $25. If you sell a call option on TSJ for $26, you earn the premium from the option sale but cap your upside
naked writing
Selling an option, but not holding the underlying asset.
Naked writers are exposed to additional risk, since they hold no position with which to hedge against the adverse movement of the underlying security’s price. If the options contract is exercised, the naked writer would be forced to buy or sell a certain number of shares at a potentially undesirable price. Naked writers try to profit by receiving premiums for writing the contracts without the need to purchase share lots.
put-call parity
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