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Essay / Research Paper Abstract
This 5 page paper is written in three parts. The first part looks at the use of call options, and how call options and call options on futures are different. The second part of the paper looks at why put options may be sold and the risks associated with selling put options. The third part of the paper examines different influences on the premiums gained on the sale of call options. The bibliography cites 4 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEcallopt.rtf
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Unformatted sample text from the term paper:
option is. Often simply referred to as a call this is a financial contract undertaken between two people. When purchasing the contract the buyer will purchase option to purchase an
agreed amount of goods, such as commodity or financial instrument, at a specific time in the future for a set price (known as the strike price). The buyer is not
obliged to make this purchase; they have the option to make the purchase. The seller of the contract is obliged to sell the goods if the buyer exercises the option.
This is a straightforward call option. To look at a call option on the future we now need to consider what a future is.
The futures market is different to the actual markets, the futures exchange is designed to be a compromise compared to the forward market and the risks it may present.
The futures market as is sounds is any contract to exchange at a future date (Howells et al, 2004). In commodities this is a legally binding agreement to deliver
or take delivery of a certain amount of goods at a certain price (Howells et al, 2004). As the contracts are standardised the amount of goods will be in standard
amounts and the delivery terms will be identical throughout all the contracts (Grossman, 1977). A call option on the future is the
option to purchase the futures contract, not the goods itself, where as a straightforward call option is the option to purchase the physical goods. The main difference between a call
option in the call option on a future is the underlying asset to which the contract pertains. Question 2 Part a Options can be bought and sold. When speculators
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