AREC 384 options

• first step to being able to buy or sell a futures contract
• the right but NOT the obligation to engage in a certain activity

right to take a long position (buy futures) at some point in the future

the right to take a short position (sell futures) at some point in the future

• the price of an option
• ex. cover charge you pay at a bar, you pay it then its gone

• the price at which the options holder can take a position in the futures market should she decide to 
• aka "exercise price"
• ex. price of drinks at a bar if you choose what you pay

• adventageous
• higher

call options at strike prices below the current futures price are said to be "in-the-money"

put options at strike prices below the current futures price are said to be "out-of-the-money"

when the strike price is equal to the current futures price, its known as being "in-the-money"