Introduction to Corporate Finance

Ross et al.: Fundamentals

of Corporate Finance, Sixth

Edition, Alternate Edition

VIII. Topics in Corporate

Finance

23. Risk Management: An
    Introduction to Financial
    Engineering

(^824) © The McGraw−Hill
Companies, 2002
Table 23.2 gives a few futures options quotations from The Wall Street Journal.
Briefly, looking at the orange juice options, note that the first column of numbers tells
us the different strike prices that are available.^3 The next three columns are call option
prices (or premiums) for three different months of expiration. The final three columns
are put option prices for the same three months.
798 PART EIGHT Topics in Corporate Finance

FIGURE 23.11

Call Option Payoff

Profile for an Option

Buyer

P

V

Payoff

profile

FIGURE 23.12

P

V

P

C. Buying a put D. Selling a put

V

P

V

P

A. Buying a call B. Selling a call

V

Option Payoff Profiles

(^3) Notice that the strike prices are all quoted in cents; for example, the first entry for oil is 2600, meaning $26
per barrel.
Information on commodity
futures and options
can be found at
http://www.futuresbasics.com.