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The options trader makes a profit of $200, or the $400 option value (100 shares * 1 contract * $4 value at expiration) minus the $200 premium paid for the call.
The value is defined as the least squares regression against market price of the option value at that state and time (-step). Option value for this regression is defined as the value of exercise possibilities (dependent on market price) plus the value of the timestep value which that exercise would result in (defined in the previous step of the ...
Producers sell homogenous goods; All firms are price takers; Perfect information; No barriers to enter and exit; All firms have relatively small market share and cannot influence price; As all firms in the market are price takers, they essentially hold zero market power and must accept the price given by the market.
A typical option strategy involves the purchase / selling of at least 2-3 different options (with different strikes and / or time to expiry), and the value of such portfolio may change in a very complex way. One very useful way to analyze and understand the behavior of a certain option strategy is by drawing its Profit graph.
For example, a nuclear power plant may "sell" radioactive waste to a processing facility for a negative price; in other words, the power plant is paying the processing facility to take the unwanted radioactive waste. [3] The phenomenon can also occur in energy prices, including electricity prices, [3] [4] natural gas prices, [5] and oil prices ...
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