Ibm Option Quotes

Again, here’s the standard definition: A derivative is a financial instrument whose value is linked to, or derived from, some other security, such as a stock or bond. For example, you could buy IBM stock; alternatively, you could buy a “call option” on IBM stock, which gives you the right to buy IBM stock at a certain time and price. A call option is a derivative because the value of the call option is “derived” from the value of the underlying IBM stock. If the price of IBM stock goes up, the value of the call option goes up, and vice versa. Most

Financial options were systematically mispriced. The market often underestimated the likelihood of extreme moves in prices. The options market also tended to presuppose that the distant future would look more like the present than it usually did. Finally, the price of an option was a function of the volatility of the underlying stock or currency or commodity, and the options market tended to rely on the recent past to determine how volatile a stock or currency or commodity might be. When IBM stock was trading at $34 a share and had been hopping around madly for the past year, an option to buy it for $35 a share anytime soon was seldom underpriced. When gold had been trading around $650 an ounce for the past two years, an option to buy it for $2,000 an ounce anytime during the next ten years might well be badly underpriced. The longer-term the option, the sillier the results generated by the Black-Scholes option pricing model, and the greater the opportunity for people who didn’t use it.