Derivatives

sanbiz20
Finance Junkie
Posts: 53
Joined: Sat Apr 01, 2017 2:12 pm

Derivatives

Postby sanbiz20 » Tue Sep 26, 2017 8:10 am

In the money, at the money & out of the money

From the following options in order to choose a particular option should we compare the original stock price(ie the stock price at the time of issuance of option) & the exercise price?

Or should we compare the mkt price of the stock at the date of expiry & the exercise price. Kindly suggest.

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edupristine
Finance Junkie
Posts: 890
Joined: Wed Apr 09, 2014 6:28 am

Re: Derivatives

Postby edupristine » Wed Sep 27, 2017 5:27 am

The current market price is useful in deciding the price of the option & the price prevailing at the expiry is helpful in deciding the gain or loss from the option contract.

We compare the price at expiry with the Exercise price to compute the gain/loss.


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