Call Option Sample Clauses


The Chicago Board Options Exchange was established in , which set up a regime using standardized forms and terms and trade through a guaranteed clearing house. Follow Grant of Call Option clause.

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Facsimile 94 Shurgard Storage Centers Inc. If Shurgard or Crescent wishes to exercise the Put Option, respectively the Call Option, the exercising Party shall notify the other Party thereof in writing in accordance with Clause 6. Without prejudice to the other remedies mentioned herein, if Crescent still fails to pay the Exercise Price on the Extended Payment Due Date, all dividend and liquidation rights attached to the Shares held by Crescent shall be automatically assigned to Shurgard as of the Extended Payment Due Date until Crescent has paid the Exercise Price and Default Interest.

Notwithstanding the exercise of the Purchase Option, Crescent remains liable for the future payment of any outstanding amount of its Equity Commitment. Upon payment of the purchase price by Shurgard, which shall be made within one hundred eighty calendar days following the determination of the purchase price, Crescent shall sell and transfer its Shares to Shurgard.

This Put and Call Option Agreement is entered into for a fixed term commencing on the signing date of the Put and Call Option Agreement and ending one 1 month following the date on which all sums due by the Issuer under the Senior Credit Agreement have been paid and repaid.

Valley Street , Suite First Shurgard Finance S. Quai du Commerce The arbitration shall be held in Geneva. The proceedings and award shall be in the English language. The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances. Your LinkedIn Connections at Firm.

IN BRIEF Put and call options are a useful way of allowing parties to enter into an agreement to sell or acquire land at a future point in time, requiring minimum upfront commitment. This article will cover some of the basic and common features of put and call options. A call option is beneficial to a buyer, with some of the main advantages being: Put and call options are documents by way of deed. The usual technical term for the parties to an option deed are: Option fee As the subject matter of an option deed is an interest in land, consideration is required to be paid when the option deed is entered into ie, on exchange of option deeds.

Depending on the type of option that is being agreed, the consideration is either: Option exercise period A call option exercise period is a set period of time during which the buyer can exercise its call option.

Ordinarily, these two periods of time are sequential. Assignment A buyer who has entered into a call option deed, but has not yet exercised the call option, may be entitled to assign its rights under the call option deed to a third party. Nominations A buyer may also be entitled to appoint one or more third parties as a nominee to exercise the call option on behalf of the buyer. For further information please contact: Do you have a Question or Comment? Interested in the next Webinar on this Topic?

Click here to register your Interest. Events from this Firm. More from this Firm. More from this Author. News About this Firm. Five key items to consider when negotiating a lease. If the stock price at expiration is above the strike price, the seller of the put put writer will make a profit in the amount of the premium. If the stock price at expiration is below the strike price by more than the amount of the premium, the trader will lose money, with the potential loss being up to the strike price minus the premium.

Combining any of the four basic kinds of option trades possibly with different exercise prices and maturities and the two basic kinds of stock trades long and short allows a variety of options strategies. Simple strategies usually combine only a few trades, while more complicated strategies can combine several. Strategies are often used to engineer a particular risk profile to movements in the underlying security. For example, buying a butterfly spread long one X1 call, short two X2 calls, and long one X3 call allows a trader to profit if the stock price on the expiration date is near the middle exercise price, X2, and does not expose the trader to a large loss.

Selling a straddle selling both a put and a call at the same exercise price would give a trader a greater profit than a butterfly if the final stock price is near the exercise price, but might result in a large loss.

Similar to the straddle is the strangle which is also constructed by a call and a put, but whose strikes are different, reducing the net debit of the trade, but also reducing the risk of loss in the trade. One well-known strategy is the covered call , in which a trader buys a stock or holds a previously-purchased long stock position , and sells a call. If the stock price rises above the exercise price, the call will be exercised and the trader will get a fixed profit.

If the stock price falls, the call will not be exercised, and any loss incurred to the trader will be partially offset by the premium received from selling the call. Overall, the payoffs match the payoffs from selling a put.

This relationship is known as put-call parity and offers insights for financial theory. Another very common strategy is the protective put , in which a trader buys a stock or holds a previously-purchased long stock position , and buys a put.

This strategy acts as an insurance when investing on the underlying stock, hedging the investor's potential loses, but also shrinking an otherwise larger profit, if just purchasing the stock without the put. The maximum profit of a protective put is theoretically unlimited as the strategy involves being long on the underlying stock. The maximum loss is limited to the purchase price of the underlying stock less the strike price of the put option and the premium paid. A protective put is also known as a married put.

Another important class of options, particularly in the U. Other types of options exist in many financial contracts, for example real estate options are often used to assemble large parcels of land, and prepayment options are usually included in mortgage loans. However, many of the valuation and risk management principles apply across all financial options. There are two more types of options; covered and naked. Options valuation is a topic of ongoing research in academic and practical finance.

In basic terms, the value of an option is commonly decomposed into two parts:. Although options valuation has been studied at least since the nineteenth century, the contemporary approach is based on the Black—Scholes model which was first published in The value of an option can be estimated using a variety of quantitative techniques based on the concept of risk neutral pricing and using stochastic calculus.

The most basic model is the Black—Scholes model. More sophisticated models are used to model the volatility smile. These models are implemented using a variety of numerical techniques. More advanced models can require additional factors, such as an estimate of how volatility changes over time and for various underlying price levels, or the dynamics of stochastic interest rates.

The following are some of the principal valuation techniques used in practice to evaluate option contracts. Following early work by Louis Bachelier and later work by Robert C. Merton , Fischer Black and Myron Scholes made a major breakthrough by deriving a differential equation that must be satisfied by the price of any derivative dependent on a non-dividend-paying stock.

By employing the technique of constructing a risk neutral portfolio that replicates the returns of holding an option, Black and Scholes produced a closed-form solution for a European option's theoretical price. While the ideas behind the Black—Scholes model were ground-breaking and eventually led to Scholes and Merton receiving the Swedish Central Bank 's associated Prize for Achievement in Economics a.

Nevertheless, the Black—Scholes model is still one of the most important methods and foundations for the existing financial market in which the result is within the reasonable range. Since the market crash of , it has been observed that market implied volatility for options of lower strike prices are typically higher than for higher strike prices, suggesting that volatility is stochastic, varying both for time and for the price level of the underlying security.

Stochastic volatility models have been developed including one developed by S. Once a valuation model has been chosen, there are a number of different techniques used to take the mathematical models to implement the models. In some cases, one can take the mathematical model and using analytical methods develop closed form solutions such as Black—Scholes and the Black model. The resulting solutions are readily computable, as are their "Greeks". Although the Roll-Geske-Whaley model applies to an American call with one dividend, for other cases of American options , closed form solutions are not available; approximations here include Barone-Adesi and Whaley , Bjerksund and Stensland and others.

Closely following the derivation of Black and Scholes, John Cox , Stephen Ross and Mark Rubinstein developed the original version of the binomial options pricing model.

The model starts with a binomial tree of discrete future possible underlying stock prices. By constructing a riskless portfolio of an option and stock as in the Black—Scholes model a simple formula can be used to find the option price at each node in the tree.

This value can approximate the theoretical value produced by Black Scholes, to the desired degree of precision. However, the binomial model is considered more accurate than Black—Scholes because it is more flexible; e.

Binomial models are widely used by professional option traders. The Trinomial tree is a similar model, allowing for an up, down or stable path; although considered more accurate, particularly when fewer time-steps are modelled, it is less commonly used as its implementation is more complex.

For a more general discussion, as well as for application to commodities, interest rates and hybrid instruments, see Lattice model finance. For many classes of options, traditional valuation techniques are intractable because of the complexity of the instrument.

In these cases, a Monte Carlo approach may often be useful. Rather than attempt to solve the differential equations of motion that describe the option's value in relation to the underlying security's price, a Monte Carlo model uses simulation to generate random price paths of the underlying asset, each of which results in a payoff for the option.

The average of these payoffs can be discounted to yield an expectation value for the option. The equations used to model the option are often expressed as partial differential equations see for example Black—Scholes equation. Once expressed in this form, a finite difference model can be derived, and the valuation obtained.