【正文】 ercise price is reduced by a factor of the split, and the number of options held is increased by that factor. For example, each original call option with exercise price of $130 would be altered after a 2for1 split to 2 new options, with each new option carrying an exercise price of $65. A similar adjustment is made for stock dividends of more than 10%。Until recently, most options trading in the United States took place on the Chicago Board Options Exchange. However, by 2003 the International Securities Exchange, an electronic exchange based in New York, displaced the CBOE as the largest options market. Options trading in Europe is uniformly transacted in electronic exchanges.s value, because delivery of the lowervalued asset in exchange for the exercise price is profitable for the holder. Options are at the money When the exercise price and asset price of an option are equal. when the exercise price and asset price are equal.p. 670Options TradingSome options trade on overthecounter markets. The OTC market offers the advantage that the terms of the option contract—the exercise price, expiration date, and number of shares mitted—can be tailored to the needs of the traders. The costs of establishing an OTC option contract, however, are higher than for exchangetraded options.Profits and Losses on a Put OptionNow consider the January 2010 expiration put option on IBM with an exercise price of $130, selling on December 2, 2009, for $. It entitled its owner to sell a share of IBM for $130 at any time until January 15. If the holder of the put buys a share of IBM and immediately exercises the right to sell at $130, net proceeds will be $130 ? $ = $. Obviously, an investor who pays $ for the put has no intention of exercising it immediately. If, on the other hand, IBM sells for $123 at expiration, the put turns out to be a profitable investment. Its value at expiration would be and the investor39。This chapter is an introduction to options markets. It explains how puts and calls work and examines their investment characteristics. Popular option strategies are considered next. Finally, we examine a range of securities with embedded options such as callable or convertible bonds, and we take a quick look at some socalled exotic options. The Option Contractp. 668A call option The right to buy an asset at a specified exercise price on or before a specified expiration date. gives its holder the right to purchase an asset for a specified price, called the exercise Price set for calling (buying) an asset or putting (selling) an asset., or strike price Price set for calling (buying) an asset or putting (selling) an asset., on or before some specified expiration date. For example, a January call option on IBM stock with exercise price $130 entitles its owner to purchase IBM stock for a price of $130 at any time up to and including the expiration date in January. The holder of the call is not required to exercise the option. The holder will choose to exercise only if the market value of the underlying asset exceeds the exercise price. In that case, the option holder may “call away” the asset for the exercise price. Otherwise, the option may be left unexercised. If it is not exercised before the expiration date of the contract, a call option simply expires and no longer has value. Therefore, if the stock price is greater than the exercise price on the expiration date, the value of the call option equals the difference between the stock price and the exercise price。VIp. 667DERIVATIVE SECURITIES, ORs broker purchases the necessary shares of IBM at the market price and immediately delivers, or “puts them,” to an option writer for the exercise price. The owner of the put profits by the difference between the exercise price and market price.)Options contracts traded on exchanges are standardized by allowable expiration dates and exercise prices for each listed option. Each stock option contract provides for the right to buy or sell 100 shares of stock (except when stock splits occur after the contract is listed and the contract is adjusted for the terms of the split).Stock options on IBM Closing prices as of December 2, 2009Source: The Wall Street Journal Online, December 3, 2009.Figure is a selection of listed stock option quotations for IBM. The last recorded price on the New York Stock Exchange for IBM shares was $ per Options are reported on IBM at exercise prices of $120 through $135.What will be the proceeds and net profits to an investor who purchases the January expiration IBM calls with exercise price $125 if the stock price at expiration is $135? What if the stock price at expiration is $115?b.Margin requirements are determined in part by the other securities held in the investor39。The construction of the indexes can vary across contracts or exchanges. For example, the Samp。There is an important difference between currency options and currency futures options. The former provide payoffs that depend on the difference between the exercise price and the exchange rate at maturity. The latter are foreign exchange futures options that provide payoffs that depend on the difference between the exercise price and the exchange rate futures price at maturity. Because exchange rates and exchange rate futures prices generally are not equal, the options and futuresoptions contracts will have different values, even with identical expiration dates and exercise prices. Trading volume in currency futures options dominates by far trading in currency options.Interest Rate OptionsConversely, the writer of the call incurs losses if the stock price is high. In that scenario, the writer will receive a call and will be obligated to deliver a stock worth ST for only X dollars: The call writer, who is exposed to losses if the stock price increases, is willing to bear this risk in return for the option premium.Figure (ii) write a ca