Explain volatility and how it effects option pricing

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Reference no: EM133629951

Questions:

1. Define the following terms:

a. Strike Price

b. Intrinsic Value

c. Bollinger Bands

2. Explain volatility and how it effects option pricing. Briefly explains option value sensitivity measures such as Delta and Vega.

3. Explain the functioning of Call options and Put Options in detail. Please show the payoff diagrams for both strategies.

4. Explain the following Option strategies:

a. Long Put

b. Bear Put Spread

c. Short Straddle

5. The case talks about three examples (Warrants, Futures, CFDs) as alternatives to trading options. Choose one of the examples and briefly explain your understanding about it.

Reference no: EM133629951

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