• Home
  • Blog
  • Decide if an option is a derivative security, business and finance homework help

Decide if an option is a derivative security, business and finance homework help

0 comments

Need response to other student discussion post


Decide if an option is a derivative security. Give
reasons to support your decisions.

1. An Option within the derivative is a privilege that is
sold by one party to another, but is not obligate to buy or sell a security at
a certain time. The Option has a premium that must be paid. There is risk that
come with options and they are complex securities. Derivatives has been around
and use within the farming industry. There are other names that are use with
this option. The Put Option is one and has the right to sell stock at a
specified price. This option is for a limited time; American Option are at any
time but has an expiration date. The European Option ban be exercised on the
expiration date.  

Compare and contrast options for warrants and calls in terms of pricing, and
explain their most important differences.
 

2 .Warrants and call options are similar in that they both
give the holder the right, but not the obligation, to buy a stock share. With a
warrant, it’s at a fixed price directly from the company for a pre-defined
amount of time. With a call option it’s at a set price for a defined amount of
time. A major difference between warrants and call option is that warrants are
issued by a specific company, and call options are issued by an options
exchange. Another difference is that warrants usually have longer maturity
periods than a call option. A third difference is that warrants cause dilution
because a company has to issue new stock when a warrant is exercised.
Exercising a call option does not require issuing new stock because a call
option is a derivative instrument on an existing common share of the company.

About the Author

Follow me


{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}