Options buyer

EXHIBIT 17.2 Value Profiles for Option Buyer and Seller... 

The opposite is true for an option seller, whose value profile is shown in Exhibit 17.2. The option seller can only lose, not gain. No one in their right mind would therefore sell options for free Instead, the option buyer must pay a premium to the option seller to acquire the rights conferred by the option. This is another important distinction between options and other derivatives (like swaps and forward rate agreements) for which no up-front payment is due. 

Exhibit 17.3 shows the payoff profiles for the buyer and seller of the bond option, once the option premium— 2 in this example—is taken into account. If the underlying bond is trading below 98, the option will expire worthless, and the option buyer will now be 2 down, as the chart shows. It is this premium income that provides the incentive for option sellers. As Exhibit 17.3 shows, so long as the bond trades at a price of 100 or lower when the option expires, the option seller ends up with a profit. 

Unlike the OTC options that we shall be examining later, the premium for these exchange-traded options is not actually paid up-front. Instead, until exercise or expiry, the option buyer and seller are both margined in the same way as with futures positions. The premium of 11,800 is only paid—again through the margining system—when the option expires or is exercised. ... 

An option is a contract between a buyer and a seller in which the buyer has the right, but not the obligation, to purchase (in the case of a call option) or sell (in the case of a put option) a specified underlying asset at a specified price during or at the end of a specified period. The option seller, or writer, grants this right in return for the option price, or premium. The option buyer is long the contract the seller is short. 

This example illustrates that the holders of long and short positions in options, unlike holders of other financial instruments, have asymmetrical payoff profiles. Call option buyers benefit if the price of the underlying asset rises above the strike by at least the amount of the premium bur lose... 

The profit-loss profile for option buyers is quite different from that for option sellers. Buyers potential losses are limited to the option premium, while their potential profits are, in theory, unlimited. Sellers potential profits are limited to the option premium, while their potential losses are, in theory, unlimited at the least, they can be very substantial. (For a more in-depth discussion of options profit-loss profile, see chapter 8.)... 

This example illustrates that the holders of long and short positions in options, unlike holders of other financial instruments, have asymmetrical payoff profiles. Call option buyers benefit if the price of the underlying asset rises above the strike by at least the amount of the premium but lose only what they paid for the option if it fails to do so. The option sellers suffer a loss if the price of the underlying asset rises above the strike by more than the premium amount but realize only the funds received for writing the option if it fails to do so. 

An option is a contract between two parties the option buyer and the option seller. The buyer has the right, but not the obligation, to buy or sell an underlying asset at a specified price during a specified period or at... 

Options can thus be likened to a form of insurance taken out against adverse price movements. For this right, the option buyer pays a one-ofif, non-refundable fee (or premium) to the seller (or writer) of the option. The premium is the extent of the buyer s liability in relation to the option. The option writer, in contrast, is exposed to unlimited liability he must be prepared to make or take delivery at the agreed price, whatever may have happened to the market price in the interim period. 

A futures contract is an agreement that calls for a seller to deliver to a buyer a specified quantity and quality of an identified commodity, at a fixed time in the future, at a price agreed to when the contract is made. An option on a commodity futures contract gives the buyer of the option the right to convert the option into a futures contract. Energy futures and options contracts arc used by energy producers, petroleum refin-... 

When considering the purchase of an automated IHC staining system, the challenge is that there are so many options from which to choose. How does one find the right system that best meets the needs (and the budget) for your unique laboratory Potential buyers in the market for an IHC automated staining system are encouraged to contact the individual vendors and ask them for an on-site laboratory demonstration of their equipment. The volume of... 

Thus, a survey should not be merely a record of the plant operational data, it should include commercial and often political information. However, it is assumed that the survey information, as presented to the buyer, should only reflect the technical position. The proposal offers commercial options based on the technical report. 

The prime customer is BOTAS, the gas and oil pipeline entity of Turkey, which is scheduled for privatisation. Turkey will buy Shah Deniz gas on an 80% annual Take or Pay contract with daily swings at the buyer s option. The sale point for Turkey is at the Turkish frontier. 

A junior partnership provides an opportunity for a buyer to purchase a pharmacy with little or no initial capital and a seller to ease out of ownership and keep the legacy of the independent pharmacy alive in the community (Jackson, 2002). Instead of trying to figure out a way to sell the pharmacy when the owner is ready for retirement, this option allows the current owner to transfer ownership to a buyer, continue to have an income, and prepare for retirement. 

One option is to allow current dealers on the ETS secondary market to become primary dealers who can bid on their own account or on behalf of clients. Because these dealers would participate more regularly than individual buyers, some transaction costs could be avoided. Small buyers might even be encouraged to participate via a dealer when they would not be willing or able to do so directly. 

In a number of cases, transactions led to an agreement between the heads of companies that had stock options and were eager to make a profit, and the potential buyers. This was how Celanese, an able and well-diversified company that had the means to retain its independence and competitiveness with regard to any major company, was acquired by Hoechst following a transaction that was satisfactory both to the German buyer and to the shareholders of the American group, at least for the time being. 

One option is to close just part of a plant in order to reduce capacity. A European chemical company shut down 20 percent of an ethylene derivative plant, cutting the planfs fixed costs by 20 percent and its personnel by 15 percent. The company was then able to find a merchant buyer for the ethylene that was produced. Despite the closing and severance costs that the company incurred and the effect on its ethylene business, the partial closure raised the facility s net present value by 35 percent. 

In clinical applications, the best recommendation for testing available applications would be to use a case-based methodology. We recommend that five or six complicated cases, which would represent a cross section of the patient population served by the pharmacy, be used to test the application. In this way, the clinician will see how the application performs throughout an entire care process and avoid the power path demonstration. In this information age, selecting clinical software is an extremely important task. The explosion of capabilities offered by the Internet can make the selection process both exciting and confusing. A careful analysis of options will usually be rewarded by better results, but wary buyers need to prepare themselves to revisit the marketplace more frequently than they might have in the past to identify innovative alternatives. 

The essential difference, however, is momentum. With 275 European systems to visit and observe features, the European buyer knows and appreciates his options. To some extent, there may be peer pressures to have an excellent system. We Americans have not been exposed to enough facilities to have developed the same Continental appetite. 

To enable such a convenient buying experience, a Web store must carry all items that customers need. Otherwise a hst of items in a shopping basket may come from a number of different vendors, the customer having collected the items after visiting the vendors individual websites. Options left to stores and buyers are to ... 

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