FMP 12. Options Markets: LOs

a) Describe the various types, uses, and typical underlying assets of options.

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

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

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

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

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