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Explain the Selling the Call Option, Buying the Put Option and Buying the Underlying Stock.
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- How to use call options and put options to create a synthetic short position in stock?Explain why common stock is itself like a call option. What plays the role of the exercise price and what plays the role of the underlying stock?Briefly describe the use of stock options in acompensation plan. What are some potential problems with stock options as a form ofcompensation?
- How to know what price target to buy a stock?Describe how a typical stock option plan works. What are someproblems with a typical stock option plan?Which of the following factors affects the price of a call option on a stock? The exercise price The stock price The time to expiration All of the above
- Discuss how equity can be viewed as an option. Who has theoption, and what decision can they make?2. Graph a call to buy option and explain how its payoff is given. Explain when it is in the money, at the money and out of the money.Explain to your client how option contract can be used as protection against a fall in stock price.
- Describe what a stock option is. what does it means to buy a "put" or a "call" and what you are expecting the stock to do for each (ie go up or down in price). Discuss when you would make money on a put option and when you would make money on a call option.Please answer one of the following questions in detail, providing examples whenever applicable. Discuss the risks and payoffs of the following positions, accompanied by payoff graphs. Buy stock and a put option on the stock. Buy a stock. Buy a call. Buy stock and sell a call option on the stock (covered call). Buy a bond. Buy stock, buy a put, and sell a call. Sell a put (naked put).Describe Stock Option Plans.
