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APPENDIX: Answers to End-of-Chapter Reviews
APPENDIX
Answers to End-of-Chapter Reviews
CHAPTER 3 ANSWERS
“I have paid a certain dollar amount to enter this trade. By doing so, I now have the right to call out and buy 100 of Shorty’s shares for $40 if I want to. I also have the right to do this anytime in the next six months. I also have the right not to call out his shares if I don’t want to; I can let my option expire. If I do, I forfeit the amount I paid to Shorty.
“Shorty, for his part, has received a certain dollar amount from me to enter this trade. By taking my money, he now has the obligation to sell me his shares for $40 if I call them out. Shorty has to do this if I exercise my option any time in the next six months. If I never exercise my option, Shorty still gets to keep the $500 I have paid him.”
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