Could

The could is a contractual option of sale making it possible to the subscriber to the option to sell a title or another credit (more generally called subjacent), at a fixed price in advance (price of exercise, also said strike ) and on a given date called date of maturity of could.

One speaks about could European if the subscriber can exert his right only to the date of maturity and of could American if it can constantly exert it before the date of maturity (including at the date of maturity).

It thus allows the purchaser could be secured against, or bet on, a fall of the price of this subjacent in lower part of the price of exercise. The sale of a could corresponds to the opposite objective.

The French-speaking official documents adopted the denomination option to sell .

Value of a could with maturity

That is to say S the value of subjacent with maturity.

That is to say K the price of exercise ( strike ) of the option.

That is to say P the value of the option with maturity.

We can write the following equality:

P = max (0, K-S)

The valorization of a could before the date of maturity is not easy matter to achieve since it is necessary to estimate the value of subjacent in the future. Nevertheless the method most usually used is that known as of Modèle Black-Scholes.

If the subjacent one is an action of a company with dimensions carrying out the payment of a Dividende, the transmitters (a banking group for example) generally anticipate the mechanical fall in the price of the action equivalent to the value of the dividend by integrating an additional parameter in their model of evaluation. Thus, the puts do not undergo in theory any depreciation at the time of the detachment of the coupon. However, it is recommended to ensure itself some near the transmitter of the option before acquisition.

See too

  • financial Stock Exchange
  • Cal
  • option
  • Mathematical
  • Model Black-Scholes

External bonds

  • an explanation (animated slides) of the operation of the options

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