1. © K. Cuthbertson and D. Nitzsche Figures for Chapter 21 OPTIONS MARKETS (Investments : Spot and Derivatives Markets)

2. © K. Cuthbertson and D. Nitzsche Figure 21.1 : Buy one European call option STST Profit Strike price K = $80 $5 -$3 Call premium $88$83 K = $80 0 0 +1

3. © K. Cuthbertson and D. Nitzsche Figure 21.2 : Sell (write) a European call option STST Profit Strike price K = $80 -$5 $3 Call premium $88 $83 K = $80 0 0

4. © K. Cuthbertson and D. Nitzsche Figure 21.3 : Buy (long) a European put option Strike price K = $70 STST Profit $3 -$2 Put premium $68 $65K = $70 0 0

5. © K. Cuthbertson and D. Nitzsche Figure 21.4 : Sell (write) a European put option Strike price K = $70 STST Profit $2 -$3 Put premium $68 $65 K = $70 0 0 +1

6. © K. Cuthbertson and D. Nitzsche Figure 21.5 : Black-Scholes Stock price Call premium 0 StSt S 1 = 100.50 S 0 = 100 CtCt C 1 = 3.2 C 0 = 3.1 A B C K Value of call prior to expiry Payoff from call at expiry BC = time value D CD = intrinsic value