【正文】 Why might one characterize both buying calls and writing puts as “bullish” strategies? What is the difference between them?c.CONCEPTCHECKThe value of a put option at expiration is The solid line in Figure illustrates the payoff at expiration to the holder of a put option on FinCorp stock with an exercise price of $100. If the stock price at expiration is above $100, the put has no value, as the right to sell the shares at $100 would not be exercised. Below a price of $100, the put value at expiration increases by $1 for each dollar the stock price falls. The dashed line in Figure is a graph of the put option owner39。 An index option is a call or put based on a stock market index such as the Samp。2Expirations of most exchangetraded options tend to be fairly short, ranging up to only several months. For larger firms and several stock indexes, however, longerterm options are traded with expirations ranging up to several years. These options are called LEAPS (for LongTerm Equity AnticiPation Securities).CONCEPTCHECK and a liquid secondary market where buyers and sellers of options can transact quickly and cheaply. no one would exercise the right to purchase for the strike price an asset worth less than that price. Conversely, put options are in the money when the exercise price exceeds the asset39。Sellers of call options, who are said to write calls, receive premium ine now as payment against the possibility they will be required at some later date to deliver the asset in return for an exercise price less than the market value of the asset. If the option is left to expire worthless, however, then the writer of the call clears a profit equal to the premium ine derived from the initial sale of the option. But if the call is exercised, the profit to the option writer is the premium ine derived when the option was initially sold minus the difference between the value of the stock that must be delivered and the exercise price that is paid for those shares. If that difference is larger than the initial premium, the writer will incur a loss.The purchase price of the option is called the premium The purchase price of an option.. It represents the pensation the purchaser of the call must pay for the right to exercise the option if exercise bees profitable.Profits and Losses on a Call OptionConsider the January 2010 expiration call option on a share of IBM with an exercise price of $130 that was selling on December 2, 2009, for $. Exchangetraded options expire on the third Friday of the expiration month, which for this option was January 15, 2010. Until the expiration date, the purchaser of the calls may buy shares of IBM for $130. On December 2, IBM sells for $. Because the stock price is currently less than $130 a share, exercising the option to buy at $130 clearly would make no sense at that moment. Indeed, if IBM remains below $130 by the expiration date, the call will be left to expire worthless. On the other hand, if IBM is selling above $130 at expiration, the call holder will find it optimal to exercise. For example, if IBM sells for $132 on January 15, the option will be exercised, as it will give its holder the right to pay $130 for a stock worth $132. The value of the option on the expiration date would then be Despite the $2 payoff at expiration, the call holder still realizes a loss of $.18 on the investment because the initial purchase price was $: p. 669Nevertheless, exercise of the call is optimal at expiration if the stock price exceeds the exercise price because the exercise proceeds will offset at least part of the cost of the option. The investor in the call will clear a profit if IBM is selling above $ at the expiration date. At that stock price, the proceeds from exercise will just cover the original cost of the call.If an option does not trade on a given day, three dots will appear in the volume and price columns. Because trading is infrequent, it is not unusual to find option prices that appear out of line with other prices. You might see, for example, two calls with different exercise prices that seem to sell for the same price. This discrepancy arises because the last trades for these options may have occurred at different times during the day. At any moment, the call with the lower exercise price must be worth more than an otherwiseidentical call with a higher exercise price.Now answer part (a) for an investor who purchases a January expiration IBM put option with exercise price $125.In contrast to stock dividends, cash dividends do not affect the terms of an option contract. Because payment of a cash dividend reduces the selling price of the stock without inducing offsetting adjustments in the option contract, the value of the option is affected by dividend policy. Other things being equal, call option values are lower for highdividend payout policies, because such policies slow the rate of increase of stock prices。s portfolio. For example, a call option writer owning the stock against which the option is written can satisfy the margin requirement simply by allowing a broker to hold that stock in the brokerage account. The stock is then guaranteed to be available for delivery should the call option be exercised. If the underlying security is not owned, however, the margin requirement is determined by the value of the underlying security as well as by the amount by which the option is in or out of the money. Outofthemoney options require less margin from the writer, for expected payouts are lower.Other Listed OptionsOptions on assets other than stocks are also widely traded. These include options on market indexes and industry indexes, on foreign currency, and even on the futures prices of agricultural products, gold, silver, fixedine securities, and stock indexes. We will discuss these in turn.p. 673Index OptionsP 100 index is a valueweighted average of the 100 stocks in the