FMP 12. Options Markets

Learning Objectives

1) Describe the various types and uses of options; define moneyness.

2) Explain the payoff function and calculate the profit and loss from an options position.

3) Explain the specification of exchange-traded stock option contracts, including that of nonstandard products.

4) Explain how dividends and stock splits can impact the terms of a stock option.

5) Describe the application of commissions, margin requirements, and exercise procedures to exchange-traded options, and explain the trading characteristics of these options.

6) Define and describe warrants, convertible bonds, and employee stock options.