FMI7e_ch14Options Markets(金融市场好机构—7e, by Jeff Madura)).pdf

Chapter 14 Options Markets Financial Markets and Institutions, 7e, Jeff Madura Copyright ©2006 by South-Western, a division of Thomson Learning. All rights reserved. 1 Chapter Outline  Background on options  Speculating with stock options  Determinants of stock option premiums  Explaining changes in option premiums  Hedging with stock options  Using options to measure a stock’s risk 2 Chapter Outline (cont’d)  Options on ETFs and stock indexes  Options on futures contracts  Hedging with options on futures  Institutional use of options markets  Globalization of options markets 3 Background on Options  A call option grants the owner the right to purchase a specified financial instrument for a specified price (exercise or strike price) within a specified period of time  Grants the right, but not the obligation, to purchase the specified investment  The writer of a call option is obligated to provide the instrument at the price specified by the option contract if the owner exercises the option  A call option is:  In the money when the market price of the underlying security exceeds the strike price  At the money when the market price is equal to the strike price  Out of the money when the market price is below the strike price 4 Background on Options (cont’d)  A put option grants the owner the right to sell a specified financial instrument for a specified price within a specified period of time Grants the