"Put Option" Essays and Research Papers

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Put Option

call option and buying a put option? Ans: Selling a call option involves giving someone else the right to buy an asset from you. It gives you a payoff of -max(St-K-0)=min (K-St,0) On the other hand, buying a put option involves buying an option from someone else. It gives you a payoff of Max (K-St,0) It may be noted that in both cases the payoff is K-St. When you write a call option, the payoff is negative or zero since the counterparty chooses to exercise. When you buy a put option, the...

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Abn Amro Reserve Exchangeable Securities

payment will calculated as 38.88*P1.5. This final payment is like selling a put option to ABN AMRO bank with a strike price of $25.72 and a payoff of Min (1000, 38.88* P1.5). Hence the investors are actually being offered a bond and a short put option. The RES value should be the difference in the value of the bond and the value of the put option. Given the price of the RES, we can calculate the fair value of the put option and the bond to see whether ABN AMRO bank has made a profit from it. Assuming...

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Avon Products Inc

due to several reasons. Firstly, Avon would be announcing the divestment of two businesses at a loss. This negative news would no doubt put downward pressure on its stock price. Secondly, Avon would be reducing dividend payments for common shares. This reduction would again be viewed as the stock generating a lower return to investment. Hence, this would also put downward pressure on its price. Finally, although the introduction of PERCS offered the same dividend payout as before, it would expire...

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Dozier: Options

the exchange risk associated with the award payment being dispersed in British Pounds (GBP). He originally considered a forward contract or a spot contract, but is now investigating how currency options could help hedge against uncertain foreign exchange exposure. The CFO needs to decide whether or not options contracts might provide some benefit to hedge the currency risk. As of 1/14/86, Dozier has received a 10% deposit of the total contract value of £1,175,000.00. At the 1/13/86 exchange rate...

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futures options

Walking Through Some Examples of Futures and Options Contracts – Speculation and Hedging As Dr. Cogley said in class the other day, sometimes futures contracts and options are hard to wrap your head around until you see them a few times. So I’ve written up some examples similar to those Dr. Cogley did in lecture, with a little more explanation about how we get the results that we do. But before we jump into that, we need to revisit our terms. 1. Forward contract: A buyer and a seller agree to a specific...

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Share Options in the Major Stocks

SHARE OPTIONS IN THE STOCKMARKET The principal business of stock exchanges is trade in physical shares, but they also trade in share options in the major stocks. An option gives the holder the right to buy or sell a share at a predetermined price at some point in the future – for example, the right to buy shares in three months’ time at a price set today. An option which gives the buyer the right to buy a share is a “call” option. An option which gives the buyer the right to sell a share is a...

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Stock Options

Many years ago stock options were rarely used as incidental benefits for top executives. Nowadays, compensating employee whit stock options has become an increasingly common practice. Before the year 1996, only the intrinsic value method was used to record these transactions. This method distorted the issuer’s reported financial condition and results of operations, which could lead to inappropriate decisions taken by investors. Followed by the increased use of employee stock options and the surrounding...

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Investment Policy Statement

has affected Procter & Gamble, they are constantly growing and reinvesting profits back into the company. RSI Chart= Bearish Options and Futures Part III By: Brittany Tice Options: 1. Buy a call: a. Bought a call of 100 shares of Nike with an expiration date of June 2010, $75 strike price and $5 premium 2. Write a put: b. Bought a put of 25 shares of Morgan Stanley with an expiration date of June 2010, $35 strike price and a $2 premium 3. Write a call: ...

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Tifanny & Co. Harvard Case Study 9-296-047

risk is less easy to measure and hedge. Alternative Ways to Manage Exchange Rate Risk For Tiffany to hedge its ¥/$ exchange rate exposure, it can choose either foreign currency options or future/forward contracts. A company due to receive foreign currency at a known time in the future can hedge its risk by buying put options, which matures at that time, on that foreign currency. This guarantees that the value of the foreign currency will not be less than the exercise price, while allowing the company...

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Stock option case study

Case Study – “Accounting for Stock Options” Congratulations, your firm has just won a new engagement for the December 31, 2012 audit of Stock It (the Company). You are the lead senior on the engagement and thus were delegated the task of auditing the client’s equity balances. In review, you noted that the client has a significant amount of stock options issued to their employees, a means that many start-up companies use to compensate employees and entice them to put in the effort to make the company...

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