How is a put option exercised?

July 8, 2024 No Comments

A: A put option is a contract that gives the option holder the right, but not obligation, to sell a set amount of shares (100 shares per contract) at the strike price before the expiry date. If the option is exercised, the option writer must purchase

How is the price of a derivative determined?

July 8, 2024 No Comments

A: Many different types of derivatives have different pricing mechanisms. The most common derivative types are futures contracts, forward contracts, options and swaps. More exotic derivatives can be based on factors such as weather or carbon emissions. A derivative is a financial contract with a

I own some stock warrants. How do I exercise them?

July 8, 2024 No Comments

A: Most stock warrants are similar to call options in that they provide the holder the right, but not the obligation, to buy shares of a company at a specified price (strike price) before the warrant expires. Unlike an option, a warrant is issued by the company instead of

If everyone is selling in a bear market, does your broker have to buy your shares from you?

July 8, 2024 No Comments

A: A broker won’t lose money when a stock goes down in a bear market because the broker is usually nothing more than an agent acting on sellers’ behalf in finding somebody else who wants to buy the shares. A broker is not required to buy

Is it more advantageous to purchase a call or put option?

July 8, 2024 No Comments

A: Before purchasing a call or put option, it is important to understand the basics of options, as they can expose an investor to potentially unlimited risk. Once a basic understanding is established, investors can start to formulate a strategy and discover the advantages of

What are the differences between AMEX and Nasdaq?

July 8, 2024 No Comments

A: While similar in purpose, the American Stock Exchange (AMEX) and the National Association of Securities Dealers Automated Quotations (Nasdaq) are also unique from one another. The AMEX is the third-largest stock exchange by trading volume in the United States. In 2008, AMEX was acquired

What do all of the letters in a stock option ticker symbol mean?

July 8, 2024 No Comments

A: The option ticker explains four main things about the option: the underlying stock, whether it is a call or a put option, the expiration month and the strike price. An option ticker is quoted by a series of letters. This is a lot of

What do the SP-500, Dow and Nasdaq futures contracts represent?

July 8, 2024 No Comments

A: A futures contract represents a legally binding agreement between a party and counterparty to pay or receive the difference between the price when entering into the contract and the price when the contract expires. Contracts carry a multiplier that inflates the value of the contract, adding leverage to the

What does “guns and butter” refer to?

July 8, 2024 No Comments

A: Guns and butter explains the relationship between two goods that are important for a nation’s long-term economic growth and stability. This classic example of the production possibility frontier (PPF) defines the relationship and conflict between a nation’s investment in the military, defense and civilian goods. Countries need to choose between two

What is a debt/equity swap?

July 8, 2024 No Comments

A: When a company wants to restructure its debt and equity mix to better position itself for long-term success, it may consider issuing a debt/equity or equity/debt swap. In the case of an equity/debt swap, all specified shareholders are given the right to exchange their

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