About This Chapter
Options in the Financial Industry - Chapter Summary
This chapter goes over different options in the financial industry. Study hedging and speculation in the stock market and also looks at long and short options strategies and the fundamentals of option valuation. Upon completion of the lessons, you could be ready to do the following:
- Define and describe stocks, payoffs and puts and calls
- Differentiate between equity and index options
- Provide a description of underlying and cash settlement options
- Compare and contrast covered and uncovered options strategy
- Describe differences between American and European options
- Explain the option disclosure document
All resources in this chapter are available 24/7 and can be utilized via your preferred computer or mobile device. Full online accessibility lets you study during timeframes you desire and visit as many times as you'd like. With each lesson is a multiple-choice quiz you can take anytime to assess your comprehension of topics covered. A practice test is also available to check your understanding of all lessons featured in this chapter.
1. Options Basics: Stocks, Payoffs & Puts & Calls
Many people believe the financial markets are limited to buying and selling shares of stock. But, in addition to stock, there are other financial instruments. In this lesson, we'll learn about option contracts - one such variation of stock shares.
2. Hedging in Finance: Definition & Example
When individuals and institutions have investments in the stock market, they are exposed to the risk of financial losses. In this lesson, we'll learn about a way to protect against some losses, known in the financial industry as hedging.
3. What is Speculation in the Stock Market?
In every financial market, speculation plays a key role. On some exchanges with cheap stocks, speculative trades are the primary trades happening. In this lesson, we'll discuss the role speculation plays in these financial markets.
4. Fundamentals of Option Valuation
Option contracts are derivative financial instruments that obtain their value from an underlying asset - usually a stock. In this lesson, we'll discuss the components that are involved in determining the exact price of an options contract.
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Other chapters within the SIE Exam Study Guide course
- Federal Laws & Regulations in the Securities Industry
- Regulatory Entities & Agencies
- Market Participants & Structure
- Federal Reserve & Market Impacts
- Economic Factors
- Equity Securities
- Debt Instruments
- Investment Companies & Packaged Products
- Municipal Fund Securities
- DPPs, REITs & Hedge Funds
- Exchange-Traded Products (ETPs)
- Overview of Investment Risks
- Trading Orders & Strategies
- Investment Returns & Trade Settlement
- Corporate Actions
- Customer Account Types & Registrations
- Anti-Money Laundering (AML)
- Books, Records & Privacy in Finance
- Public Communications & Suitability Requirements
- Prohibited Activities in the Financial Industry
- Regulatory Framework in the Security Industry