【正文】 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。t need to own the shares of IBM to exercise the IBM put option. Upon exercise, the investor39。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.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.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。 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.VIp. 667DERIVATIVE SECURITIES, ORChapter20: Options Markets: IntroductionChapter OpenerPARTTrading of standardized options contracts on a national exchange started in 1973 when the Chicago Board Options Exchange (CBOE) began listing call options. These contracts were almost immediately a great success, crowding out the previously existing overthecounter trading in stock options. Option contracts are traded now on several exchanges. They are written on mon stock, stock indexes, foreign exchange, agricultural modities, precious metals, and interest rate futures. In addition, the overthecounter market has enjoyed a tremendous resurgence in recent years as trading in customtailored options has exploded. Popular and potent tools in modifying portfolio characteristics, options have bee essential tools a portfolio manager must understand. 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.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