NEW STOCK OPTION RULES CTF H. WASSERMAN Page 4 (3) if the security is a share, it is an ordinary common share.2 iii) Specified Shareholder A specified shareholder is defined 3 as a person that owns, directly or indirectly, at least 10% of the issued shares of any class of the capital stock . Financial Derivatives Practice – Properties of Stock Options. Sept 29/ Strike The following quotes were observed for options on a given stock on November 1 of a given year. These are American calls except where indicated. Use the information to answer questions 1 through The stock price was The risk-free rates were. Properties of Stock Options Prf. JoséFajardo Fundação Getulio Vargas 1 Notation 2 c: European call option price p: European put option price S0:Stock price today K: Strike price T: Life of option σ: Volatility of stock price C: American call option price P: American put option price S T Stock price at option maturity D: PV of dividends paid during life of option.

### The Options Market

The two types of stock options are puts and calls. Call options confers the buyer the right to buy the underlying stock while put options give him the rights to sell them. Strike Price. The strike price is the price at which the underlying asset is to be bought or sold when the option is exercised. Properties of stock options Factors affecting option prices Assumptions and notation Upper and lower bounds for option prices Put-call parity Early exercise: calls on a non-dividend-paying stock Early exercise: puts on a non-dividend-paying stock Properties of Stock Options Prf. JoséFajardo Fundação Getulio Vargas 1 Notation 2 c: European call option price p: European put option price S0:Stock price today K: Strike price T: Life of option σ: Volatility of stock price C: American call option price P: American put option price S T Stock price at option maturity D: PV of dividends paid during life of option.

Properties of stock options Factors affecting option prices Assumptions and notation Upper and lower bounds for option prices Put-call parity Early exercise: calls on a non-dividend-paying stock Early exercise: puts on a non-dividend-paying stock 1 Ch 9 股票選擇權的特性 Properties of Stock Options Notations C: The value of American call option P: The value of American put option c: The value of European call option p: The value of European put option K: The strike (exercise) price T: The time to maturity σ: The volatility of the stock price r: The risk-free interest rate. 1 FNCE Derivative Securities Tutorial 2: Properties of Stock Options - Solutions Question 1 What is the lower bound of a six-month call option on a non-dividend-paying stock when the stock price is $80, the strike price is $75, and the risk-free interest rate is 10% per annum? The lower bound is 80 – 75e ()() = $ Question 2 The price of a European call that expires in six.

### Option Contract Specifications

Properties of Stock Options Outline Factors Bounds Put-call parity E↵ect of dividends Upper and lower bounds for option prices The option can never be worth more than the stock, that is, c S 0 and C S 0. Otherwise, an arbitrageur can make a riskless proﬁt by buying the stock and selling the call option. It is a cost of delaying exercise on in-the-money options. To see why, consider an option on a traded stock. Once a call option is in the money, i.e, the holder of the option will make a gross payoff by exercising the option, exercising the call option will provide the holder with the stock and entitle him or her to the dividends on. Properties of stock options Factors affecting option prices Assumptions and notation Upper and lower bounds for option prices Put-call parity Early exercise: calls on a non-dividend-paying stock Early exercise: puts on a non-dividend-paying stock

1 Ch 9 股票選擇權的特性 Properties of Stock Options Notations C: The value of American call option P: The value of American put option c: The value of European call option p: The value of European put option K: The strike (exercise) price T: The time to maturity σ: The volatility of the stock price r: The risk-free interest rate. Properties of stock options There ain't no such thing as a free lunch. —A Libertarian Movement slogan Overview † Factors affecting option prices † Assumptions and notation † Upper and lower bounds for option prices † Put-call parity † Early exercise: calls on a non-dividend paying stock † Early exercise: puts on a non-dividend. Properties of Stock Options Outline Factors Bounds Put-call parity E↵ect of dividends Upper and lower bounds for option prices The option can never be worth more than the stock, that is, c S 0 and C S 0. Otherwise, an arbitrageur can make a riskless proﬁt by buying the stock and selling the call option.

## Recent Comments