Hugo Boss Case Study

Only available on StudyMode
  • Download(s) : 136
  • Published : April 16, 2013
Open Document
Text Preview
Options 4/3/2012

Option: you have the choice to buy something for a certain price but if the price is less than that price forget about the contract. The most you ever pay is the contract price. You have the possibility of doing better. Nothing to lose only gain since you locked in a certain price; seller of contract can only do worse. The person whom makes the contract charges a price to enter into the contract, the seller keeps this contract. This price is called the premium, options start life with a value, it is an impure derivative. The underlying is instrument is what the contract is about person whom buys the contract Is known as the option buyer/investor, seller is known as the option writer/issuer, what you pay if you exercise the contract is known as the strike price or exercise price. Options have expiration days after that we can not use them anymore, another parameter is the type of option that it is Six parameters: Underwriting asset, parties involved, strike price/exercise price, expiration date, type of option. The premium fluctuates with demand, the contract could be sold Underlying: SBUX 1,000

Strike Price: 60 a share
1 Month:
Type: Call
Premium: 8
If you do not exercise the option it is allowed to expire
Options come in types, Styles, and classes
Put option right to sell at a certain price
Put option:
Underlying: sbx, 1000 shares, spot price 55
Strike price: 50
Time: 1 Month
Premium: in a put option you pay for the buy to sell
Options come in three styles:
European Style: You can exercise on a certain date, only at expiration
American Style: You can exercise at any time, makes premium from an American option more but not by much only worth a lot more when dividends high dividends and low interest rates are present
Bermuda Options: specific dates when you can exercise them
Pay off diagram

50 55 60 (exercise price)
Starbucks pricePayoff
300
400
500
60 0
7010
8020
10040
tracking img