2. Consider Buying a Home!
s A house cost 100k
s You visit the house.
s You like the house.
s You want to buy the house!
s You don’t have the money, yet!!
s You may pay earnest money!
s You buy the option to purchase the house over the
next 30 days for $10,000.
3. Consider an option to buy a stock
s ABTL trades at 4.59
s ABTL has a CALL option that has a strike price of
$5.
s 1 call option is for 100 shares of stock.
s $60 is the cost to have the option to buy 100 shares
of the stock for $500 over the next 30 days.
s Max Loss is $60
s Max Profix is unlimited.
4. Consider an Option to SELL!
s ABTL trades at 4.59
s ABTL has a PUT option that has a strike price of
$5.
s The PUT option is IN THE MONEY if the stock
trades below $5 (i.e., you have intrinsic value in the
put option).
s The intrinsic value is 5 = 4.59 = 0.41.
s You pay $0.70 per share * 100 share = $70 for 30
days worth of $5 protection.