【正文】 hich 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 OptionsBecause the OCC guarantees contract performance, option writers are required to post margin to guarantee that they can fulfill their contract obligations. The margin required is determined in part by the amount by which the option is in the money, because that value is an indicator of the potential obligation of the option writer. When the required margin exceeds the posted margin, the writer will receive a margin call. In contrast, the holder of the option need not post margin because the holder will exercise the option only if it is profitable to do so. After purchase of the option, no further money is at risk.The 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.Suppose that IBM39。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。To account for a stock split, the exercise 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%。Now answer part (a) for an investor who purchases a January expiration IBM put option with exercise price $125.a.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.The exercise (or strike) prices bracket the stock price. While exercise prices generally are set at fivepoint intervals, larger intervals sometimes are set for stocks selling above $100, and intervals of $ may be used for stocks selling at low prices. If the stock price moves outside the range of exercise prices of the existing set of options, new options with appropriate exercise prices may be offered. Therefore, at any time, both inthemoney and outofthemoney options will be listed, as in this example.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.Standardization of the terms of listed option contracts means all market participants trade in a limited and uniform set of securities. This increases the depth of trading in any particular option, which lowers trading costs and results in a more petitive market. Exchanges, therefore, offer two important benefits: ease of trading, which flows from a central marketplace where buyers and sellers or their representatives congregate。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.An option is described as in the money In the money describes an option whose exercise would produce profits. Out of the money describes an option where exercise would not be profitable. when its exercise would produce profits for its holder. An option is out of the money Out of the money describes an option where exercise would not be profitable. In the money describes an option where exercise would produce profits. when exercise would be unprofitable. Therefore, a call option is in the money when the asset price is greater than the exercise price. It is out of the money when the asset price is less than the exercise price。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