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  • 1.  Dervivatives

    Posted 10-18-2019 02:51 PM
    Why the option ic B not AWhy the option is B not A


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    Syed Yousuf Jamal

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  • 2.  RE: Dervivatives
    Best Answer

    Posted 10-19-2019 05:20 AM
    Purchasing a put option on that stock gives the company (holder) the right to sell the stock (underlying) at a fixed price.

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    Avigael Mejia CPA
    Accountant
    AL JABER TRADING & CONTRACTING CO. WLL
    DOHA
    Qatar
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    Original Message


  • 3.  RE: Dervivatives

    Posted 10-20-2019 06:05 AM
    Company is currently holding the stock and it is expecting that the stock price might fall in the future. in order to avoid huge loss it should enters into a put option contract saying that i am going to sell this stock at the specified price in the future even if the price fall below the specified price.

     Example: 
    Abc company holding stock worth 100$ today.
    It is expecting that price of the stock might fall to 50$ in future. If this happens it will loss 50$.
    In order to avoid this loss in future it enters into put option contract saying that i will sell this stock for 95$ in the future date even if the price drops to 50$. 
    In order to enter into option contract we need to pay option premium for example let's take 5$

    In future price droped to 50$.
    If you have not entered into contracts you would loss 100$-50$= 50$

    Afer taking option contract.
    100$-95$-5$=0$ no loss.

    You can take the call option only when you are expecting that the prices of the stock might go up Not when you are expecting that price might drop.



    Original Message


  • 4.  RE: Dervivatives

    Posted 10-19-2019 07:57 AM
    Put option gives them the right to '
    "Put" the right Up for sale It protects them from a decline in the price of a stock

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    Craig Calvert
    Analyst
    Brandenburg KY
    United States
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    Original Message


  • 5.  RE: Dervivatives

    Posted 10-19-2019 08:42 AM

    when you choose option A that means you want to purchase a stock when the prices are high  and you hedge against price increasing 

    A call option gives you a right to purchase stock at a specific price 

    A put option gives you a right to sell a stock owned at a specific price 



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    Samer Dadoush
    Accountant
    Jeddah
    Saudi Arabia
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    Original Message


  • 6.  RE: Dervivatives

    Posted 10-19-2019 11:15 AM
    I understand hedging against price increase then the put option would be correct.

    My Question is if the company has a long term plan to acquire the competitor, and the price increase is only for a short time. Wouldn't it be the best option to bbuy the stocks at a cheaper price.Why would he want hedge against short term risk?

    That's whats confusing. Can someone explain?

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    Yajna Fernando
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    Original Message


  • 7.  RE: Dervivatives

    Posted 10-19-2019 12:16 PM
    Because it's an option, they don't have to do it



    Original Message