Chapter 1Introduction to Options
This book is concerned with making money from the financial markets. If you pick up just one thing from it that you use successfully for the rest of your life, it will be worth it. And I believe you will.
During this chapter I provide a basic overview of options and set the basic foundations that you will need for the chapters ahead.
Definition of an Option
An option conveys the right, not the obligation, to buy (or sell) an asset at a fixed price before a predetermined date.
Here are the salient components of that definition:
• the right, not the obligation
• to buy or sell an asset
• at a fixed price
• before a predetermined date
These components play important roles in the valuation of an option. Remember ...