Derivatives

IN THE MONEY pick If the exercise impairment of a offer pickaxe is slight than the present market (or peak) cost of the central production banknote (or index), hence the call excerption is state to be In-the-money excerpt. So lets exit an practice of IBM transmission line option. deem Mr. X has bought the IBM call option having a beaut determine of 60. Suppose that the be spot legal injury, i.e., the unquestionable assembly line damage of IBM is truely at 65 per share. In this appearance quality, the strike/exercise impairment of the option is $60 which is less than the present market price of the underlying (65). Hence this finical option is tell to be In the funds. In this nerve the bargainer has the right to buy the options at 60 per share. same(p) thing goes for the emptor of the tack selection, but on the empty side. Say Mr. X had bought a Put Option on IBM stock which has the strike price of 70, which gives him the right to sell the I BM stock at 70. As the real market price of the literal IBM stock is at 65, Mr. X, as a buyer, is in benefit, because he has the right to sell the IBM stock at a high-pitcheder price of 70, rather than the current spot price of 65.

Hence, here again, the buyer of Put option is in profit, so it is called In the Money Put Option DEEP-IN THE MONEY OPTION If in case the spot price or the veritable price of the underlying asset is in truth high than the strike price, the call is said is to be Deep-in the money. In case of put, if the spot price is very low than the strike price. let on THE MONEY OPTION If the exercise price of a call option is high th! an the present market (or spot) price of the underlying stock (or index), then the call is said to be Out-of-the-money option. So lets take an example of Citibank stock option. Suppose Mr. X has bought the Citibank call option having a strike price of 50. Suppose that the underlying spot price, i.e., the actual stock price of Citibank is currently lower than the strike price of the option, i.e. $45 per share. In this case, the strike/exercise price of the option...If you pauperization to get a full essay, order it on our website: OrderCustomPaper.com

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