【正文】 Standard amp。In contrast to stock options, index options do not require that the call writer actually “deliver the index” upon exercise or that the put writer “purchase the index.” Instead, a cash settlement procedure is used. The payoff that would accrue upon exercise of the option is calculated, and the option writer simply pays that amount to the option holder. The payoff is equal to the difference between the exercise price of the option and the value of the index. For example, if the Samp。Put OptionsA put option is the right to sell an asset at the exercise price. In this case, the holder will not exercise the option unless the asset is worth less than the exercise price. For example, if FinCorp shares were to fall to $90, a put option with exercise price $100 could be exercised to clear $10 for its holder. The holder would purchase a share for $90 and simultaneously deliver it to the put option writer for the exercise price of $100.Payoff and profit to call writers at expiration (iii) buy a put。 that is, the calls provide profits when stock prices increase. Purchasing puts, in contrast, is a bearish strategy. Symmetrically, writing calls is bearish, whereas writing puts is bullish. Because option values depend on the price of the underlying stock, purchase of options may be viewed as a substitute。Consider these four option strategies: (i) buy a call。Figure Payoff and profit to call option at expirations value increases by $1 for each dollar increase in the stock price. This relationship can be depicted graphically as in Figure .P 500 (the SPX), the NASDAQ 100 (the NDX), and the Dow Jones Industrials (the DJX), are the most actively traded contracts on the CBOE. Together, these contracts dominate CBOE volume.Futures OptionsThe Options Clearing CorporationThe Options Clearing Corporation (OCC), the clearinghouse for options trading, is jointly owned by the exchanges on which stock options are traded. Buyers and sellers of options who agree on a price will strike a deal. At this point, the OCC steps in. The OCC places itself between the two traders, being the effective buyer of the option from the writer and the effective writer of the option to the buyer. All individuals, therefore, deal only with the OCC, which effectively guarantees contract performance.a.t need to own the shares of IBM to exercise the IBM put option. Upon exercise, the investor39。 more simply derivatives, play a large and increasingly important role in financial markets. These are securities whose prices are determined by, or “derive from,” the prices of other securities. These assets are also called contingent claims because their payoffs are contingent on the prices of other securities. Options and futures contracts are both derivative securities. We will see that their payoffs depend on the value of other securities. Swaps, which we will discuss in Chapter 23, also are derivatives. Because the value of derivatives depends on the value of other securities, they can be powerful tools for both hedging and speculation. We will investigate these applications in the next four chapters, starting in this chapter with options. but if the stock price is less than the exercise price at expiration, the call will be worthless. The net profit on the call is the value of the option minus the price originally paid to purchase it.Example A put option The right to sell an asset at a specified exercise price on or before a specified expiration date. gives its holder the right to sell an asset for a specified exercise or strike price on or before some expiration date. A January expiration put on IBM with exercise price $130 entitles its owner to sell IBM stock to the put writer at a price of $130 at any time before expiration in January even if the market price of IBM is less than $130. While profits on call options increase when the asset increases in value, profits on put options increase when the asset value falls. A put will be exercised only if the exercise price is greater than the price of the underlying asset, that is, only if its holder can deliver for the exercise price an asset with market value less than the exercise price. (One doesn39。s profit would be $ ? $ = $. This is a holding period return of $$ = .461, or %—over only 44 days! Apparently, put option sellers on December 2 (who were on the other side of the transaction) did not consider this oute very likely.Figure Figure shows both call and put options listed for each expiration date and exercise price. The three sets of columns for each option report closing price, trading volume in contracts, and open interest (number of outstanding contracts). When we pare prices of call options with the same expiration date but different exercise prices in Figure , we see that the value of a call is lower when the exercise price is higher. This makes sense, because the right to purchase a share at a lower exercise price is more valuable than the right to purchase at a higher price. Thus the January expiration IBM call option with strike price $130 sells for $ whereas the $135 exercise price January call sells for only $.84. Conversely, put options are worth more when the exercise price is higher: You would rather have the right to sell shares for $135 than for $130, and this is reflected in the prices of the puts. The January expiration put option with strike price $135 sells for $, whereas the $130 exercise price January put sells for only $.p. 6711 the number of shares covered by each option is increased in proportion to the stock dividend, and the exercise price is reduced by that proportion.p. 672s stock price at the exercise date is $140, and the exercise price of the call is $130. What is the payoff on one option contract? After a 2for1 split, the stock price is $70, the exercise price is $65, and the option holder now can purchase 200 shares. Show that the split leaves th