Listed Option
An exchange-traded option is a standardized derivative contract, traded on an exchange, that settles through a clearinghouse and is guaranteed.
Definition: Listed options are standardized derivative contracts that are traded on exchanges and settled through clearinghouses, which provide guarantees. Listed options allow investors to buy or sell the underlying asset at a predetermined price at a specific future date.
Origin: The history of listed options dates back to 1973 when the Chicago Board Options Exchange (CBOE) introduced the first standardized options contracts. This innovation greatly promoted the development of the options market, making options trading more regulated and transparent.
Categories and Characteristics: Listed options are mainly divided into call options and put options. A call option gives the holder the right to buy the underlying asset at a specific price at a future date, while a put option gives the holder the right to sell the underlying asset at a specific price at a future date. The characteristics of listed options include standardized contracts, exchange trading, clearinghouse guarantees, and high liquidity.
Specific Cases: 1. Suppose Investor A buys a call option on Apple Inc. stock with a strike price of $150 and a term of 3 months. If Apple's stock price rises to $160 within 3 months, Investor A can buy the stock at $150, thus making a profit. 2. Investor B buys a put option on the S&P 500 index with a strike price of 4000 points and a term of 6 months. If the S&P 500 index falls to 3900 points within 6 months, Investor B can sell at 4000 points, thus making a profit.
Common Questions: 1. What is the strike price of an option? The strike price is the price at which the underlying asset can be bought or sold as specified in the option contract. 2. What happens when an option expires? If the option is profitable at expiration, the holder can choose to exercise it; otherwise, the option will expire worthless.
