Can options explain strategy? Gridiron quarterback option play. Source: Wikimedia. Public Domain. Options are choices. Strategy is acting on our choices. When a company decides to lay off workers and focus on an online platform, they’re exercising a real, strategic option. When the market falls and investors exercise protective puts on S&P 500 futures, they’re exercising financial options. When professionals “dress for success” and choose between flats and heels, they’re exercising personal options. Investment strategies can be explained with options, too. Two of [...]

Can options help us understand how investments work? Source: Option-Price.com Sure they can. Options are choices: the right, but not the obligation, to buy or sell something. When you combine investment options with other instruments, you can see how the combination explains how another investment works. First, we need a quick course on option pricing. An option price has four major components: the stock price, the exercise price, the time left until expiration, and the underlying volatility stock. If you wanted an option [...]

Where do we find options in every life? Chrome browser settings. Source: Ctrl blog Options are choices. They represent the ability, but not the obligation, to buy or sell something. Financially, we know that options are complex instruments that have strike prices, an implied leverage and time-decay. They’re priced according to a complex formula that only folks with high-powered math or finance degrees really understand. But they show up in all kinds of unexpected places. Consider mortgages. Most people have a mortgage on [...]

Can we use options to invest? Illustration: Koltepranita. Source: Wikipedia Options are powerful. And there’s a lot to understanding them. Call options give us the right, but not the obligation, to buy something at a specific price within a certain time. They don’t cost as much as the underlying stock, but they benefit just as much when the price goes up. As a result, there’s a lot of implicit leverage in an option. An option on a $100 stock might cost you $3. [...]

What are options? Source: Pxhere. CC0 Strictly speaking, options are choices: the choice to buy, sell, or hold; the choice own or rent a home; the choice of what to plant in the garden. Having options means we have the ability to make – or not make – choices about our lives. Financially, though, options have a very specific meaning. An option on a stock or bond is the right, but not the obligation, to buy or sell the security at a specified price [...]