📝 One-liners · 65 cards
OPTIONS
What is an option in the context of financial derivatives?
An option is a contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a predetermined price on or before a specified date.
What is the payoff of a call option at expiry?
Maximum of (spot price minus strike price) or zero
What is the difference between a call option and a put option?
A call option gives the holder the right to buy the underlying asset, while a put option gives the holder the right to sell the underlying asset at the strike price.
What is the payoff of a put option at expiry?
Maximum of (strike price minus spot price) or zero
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