Category archives: Options

Call and put options

How To Value Call And Put Options

Last update on April 10, 2014.

Merton and Scholes, along with Fischer Black (deceased) changed finance forever when they introduced the famous Black Scholes model. In this article, I explain how the model affects options prices in layman's terms.

 

In the last two articles in this series, I explained what call and put options are. In this article, I'll explain how investors value them.

Today, most investors use a formula called the Black Scholes equation to value both call and put options. Although not perfect, it's relatively simple (compared to other more sophisticated formulas, anyway) and it's accurate enough. In fact ...

Continue reading

Put Options Explained Using Examples

Last update on March 27, 2014.

Fire insurance

Fire insurance: You can think of put options as a form of insurance.

 

In the last episode of My TFSA Update, I said that I plan on buying options in the coming months. Then 2 weeks ago, I explained what call options are. In this post, I will explain another variety of options called 'put options'. As I did last time, I'll not only explain what they are, but how to think about such options.

But before I begin, I want to again give a big word of caution. Options are complex financial instruments. Using options is kind ...

Continue reading

Call Options Explained Using Examples

Last update on March 27, 2014.

Leverage

Leverage: Buying call options is like using leverage (i.e. using debt) to buy stocks, but with one very important twist

 

In the last episode of My TFSA Update, I said that I plan on buying options in the coming months. In this post, I will explain one such variety of options, and that's call options. But perhaps more importantly, I'll explain how to think about call options.

But before I begin, I want to give a big word of caution. Options are complex financial instruments. Using options is kind of like using dynamite - useful, but dangerous ...

Continue reading



Web Analytics