Chapter 20
Financial Options
I. Chapter Outline
The following chapter outline is correlated to the PowerPoint Lecture Slides. The PowerPoint slides
are referenced in bold. Alternative Examples to selected textbook examples are also available in the
PowerPoint Lecture Slides and are also referenced in bold.
20.1 Option Basics (Slides 6–7)
• Understanding Option Contracts (Slides 8–10)
20.2 Option Payoffs at Expiration (Slide 22, 24)
• Long Position in an Option Contract (Slides 22, 24)
• Figure 20.1 Payoff of a Call Option with a Strike Price of $20 at Expiration (Slide 23)
• Example 20.2 Payoff of a Put Option at Maturity (Slides 25–26)
• PowerPoint Alternative Example 20.3 (Slides 27–28)
• Short Position in an Option Contract (Slide 29)
• Figure 20.2 Short Position in a Call Option at Expiration (Slide 30)
• Example 20.3 Payoff of a Short Position in a Put Option (Slides 31–32)
• Combinations of Options (Slides 40–49)
– Straddle (Slide 40)
• Figure 20.5 Payoff and Profit from a Straddle (Slide 41)
• Example 20.5 Strangle (Slides 43–44)
– Butterfly Spread (Slides 45–46)
• Figure 20.6 Butterfly Spread (Slide 46)
– Portfolio Insurance (Slide 47–48)
• Figure 20.7 Portfolio Insurance (Slide 49)
