How is the value of an option determined?
337821
The use of Black Scholes Merton is very popular for short-term European option pricing, but there are other models to choose from.  Black Scholes is part of a group of models known as a closed form group, because they are continuous functions (no breaks in the line).  It is very popular to use, because it is a straight forward equation and, once you carefully estimate the parameters, it is very easy to use.  A major flaw of BSM is that it is a non-linear approximation based on one of the equations found in Thermodynamics (I can't remember which one).  So the model does not hold for long-term options or for options that can be exercised at any time (i.e. American options).  \n\nAnother group of models, known as lattice models, have gained popularity.  The binomial model was developed at the same time as Black Scholes, but tackles the problem from a different route.  Binomial models say that a price can go up or down, and the result (very simplified) is a weighted average of probablilies and price movements in various scenarios.  The benefit of this model is that expected exercise date and expected volatility are OUTPUTS of the model, instead of inputs for Black Scholes.  This feature makes lattice models able to value American options and options on new companies (without significant operating history).\n\nOther models include iterative simulation techniques such as Monte Carlo.  This approach is similar to the Black Scholes model in that you input probability distributions and expected values for your value drivers.  The difference comes in the output, which is discrete as opposed to the continuous Black Scholes.  I know this stuff is technical, but if you are interested, there is a ton of research on all of these models.  Have fun.
585938
Decision Tree Analysis involves methodically mapping out all the options you have for a given decision, then applying the following 'expected value' formula to each option:\n\nexpected value  = probability x outcome\n\nFor instance, let's say I'm trying to decide whether to put $100 into the stock market or to put it under my mattress.  Let's also say there is a 60% chance that my investment will become $200, and a 40% chance that my investment will shrink to $10 (I just made these numbers up).  The expected value of putting my money in the stock market is:\n\n(60% * $200) + (40% * $10) = $124\n\nSince $124 is higher than the $100 that I would get by stuffing the money in my mattress, decision tree analysis would say I should put the money in the market.\n\nDecision Tree Analysis can get very complex very quickly when you think of all the options available to a given decision.  Good luck!
194972
There is definitely a formula, but I can't figure it out exactly.  In the later rounds, you can usually add what money is left and divide it by the number of cases and get apretty much what will be offered.
868924
This is the Black-Scholes option pricing formula that is used to price European-style options.\n\nN(d2) and N(d1) are taken from the normal probability distribution tables. You are missing two more formulas there. That is, there's a separate formula for d1 and d2. See here for them:http://en.wikipedia.org/wiki/Black-Scholes\n\nOnce you have all the variables, just plug them in and get your option price.
1025486
Schedule date = date of booking\nValue date = date relevant for the run of interests\n\nYou will always receive or pay interests until/from the value date of the transaction.
454757
Yes and it does have to do with dividends.  You'll want to exercise early if the stock is about to pay a dividend and the "time value" of the option is less than the dividend.  \n\nWhat does that mean?  Well, a stock's price should drop after a dividend is paid so if the current market price is just slightly above your option's strike price, the option could go from an "in the money" option (meaning if you exercise you'll get some cash) to an "out of the money" option (meaning you'll get nothing).  Still, even this wouldn't mean that you'd definitely want to exercise the option unless the expiry date of the option was also coming up.  I.e. the stock price doesn't have a reasonable chance of recovering from the dividend payment to get back "into the money".
1012616
1. The total number of options and/or futures contracts that are not closed or delivered on a particular day.\n\n2. The number of buy market orders before the stock market opens.
652060
I think you are refering to option pricing models.\nYou want to search online for real option theory that lets you build models for build-vs-buy decisions. I have attached a link for starters, you can also look in Wikipedia for Black-Scholes option pricing model to get an introduction to it.
917710
Buy a call when you are expecting a stock to go up.  A call is an option to buy.\n\nBuy a put when you expect the stock to go down.  A put is an option to sell.\n\nThe strike price determines the 'sales price'\n\nIf you expect goog to bounce, you would by a call for Dec, Jan, Feb, whenever for a strike price of 500.  Dec call would cost you $8 per share (you need to buy in contracts consisting of 100 shares to trade options).  If goog goes past $508 in a true options trade, you profit every cent after that.  You could essentially trade the option when it got close to 500 if there was enough time for the option to have value.\n\nIf you are expecting goog to continue the downward trend, you would buy a put.  The $480 strike for goog Dec option is trading at $7.40.  You essentially have the option to sell goog at $480, so if goog goes down past 472.60 you make money for every cent after that.  Also with the call option, you could just sell your option with more value if the stock starts going down and you still have the intrinsic (time sensitive) value left on the option.\n\nGood luck.
739164
You are correct.  If the price of the stock rises, the price of the call option will rise.  You can sell your call option and profit without having to exercise it.  The profit will usually be the same wether you sell the option or exercise and buy the stock and resell it.\n\nhth
400085
A stock option is an offer or promise by a company to another party to sell to the other party company stock at a price at or below street value. If the offer is made at a price that is below street value, the company can expect to loose money on the transaction whenever the sale occurs. This for accounting purposes is recorded as a loss to the company, and losses reduce the income of the company - and the loss/reduced income is recorded before the corporate taxes are paid, so the loss is pre-tax.\n\nYou accountants out there feel free to blow me out of the water, if I'm not right, but this is the way my accountant buddy explained it to me.
323331
Very easy\n\nDo this\n\nChoice 1 \n  Advantages\n  Disadvantages\nChoice 2\n   Advantages\n   Disadvantages\n\nSee wat make sense. Even if this doesnt help,then assign some value to each adv and disadv. Finally ADD all values and see which is sensible.\n\nIt works. This helps u to make a wise and strong decision.\n\nIf Value of Choice 1 > Choice 2, then choice is easy to make.\n\n*** values to each item under adv and dis purely depends on how imp are those to u.\n\nAdv = give + value\nDisadv = Give  -ve value.\nGoodluck..
1134715
Valuation of financial derivatives (options, futures, forwards, etc)\nReal hard math, but real good money.
843424
None of the above.\n\nWhat determines your value to a company is your ability to pick up new things, and get the job done using whatever technology is the most appropriate.
174470
You typically cannot do the calculations yourself without knowing what crediting rate the particular insurance company uses when calculating your payout amount. This rate will vary from company to company. Remember that annuities have two phases, accumulation and distribution. The type of annuity (fixed, variable, equity index) typically doesn't have any relation to what annuitization options are available to the owner at annuitization.\n\nDuring Accumulation:\n\nFixed annuities credit a specified interest rate, set annually with a minimum rate specified in the contract.\n\nVariable annuities have several subaccounts (like mutual funds) that you can allocate among. The rate of return is determined by market forces. You can be as aggressive or as conservative with your allocation as you like. Many VA's also have optional guarantees that will provide a floor to the account value used to calculate your payout at annuitization. These typically range from 5-7% equivalent annual rate of return.\n\nEquity index annuities tie the rate you earn to an index, with a cap on performance. If the index returns over the cap, your account gets the cap rate. If the index is below the cap but still positive, you get that rate. If the index has negative returns (loses money) you get 0%, but no loss.\n\nAT ANNUITIZATION:\n\nAll contracts will typically have several options. The most prevalent are:\n\nStraight Life - Payout based on owner's assumed mortality age only. Payouts stop only when owner dies. If you outlive the insurance company's assumption, you win. If you don't, the insurance company wins. This option results in the highest monthly payout amount\n\nJoint and Survivor- Payout based on owner's and spouse's (or other named party) assumed mortality age. If annuitiant dies, survivor gets some percentage of payout for the rest of their life. This percentage is usually 50, 75 or 100%, The payout amounts are much lower in this option than in Straight Life option\n\nInstallment Refund - Payments based on owners mortality, but if owner dies before sum of payments at least equals the total amount annuitized the payments continue to a specified beneficiary until they total the full amount annuitized. If the owner lives beyond expected mortality, payments continue until owners death. This option usually yields a payout slightly less than the straight life option. In my experience, this is the most popular option.
460933
They don't really buy the stock.  Normally, they can get stock options granted to them as part of their compensation package.  Usually, though, the exercise price of the options is above 0.  This doesn't really matter.  They're still getting "free" money in that they don't have to buy the stock on the open market.
235815
I'm not sure what put and call options are. Are they called something else?