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Welcome! April 04, 2011

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Few administrative things Options Intro! (Very Intro) Stock Profile

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In the next few weeks, we will begin transition of officers Any paid member can apply Will update but generally: Submit resume and application Short interview

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Finally running at full steam http://ccig.osu.edu http://ccig.osu.edu

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5 Call options Put options

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6 A call option gives you the right to buy within a specified time period at a specified price The owner of the option pays a cash premium to the option seller in exchange for the right to buy

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Buy a ticket to Ohio State football game Three options: Go to the game Sell it Let it expire University wrote the option and gets to keep the premium (ticket cost) no matter which alternate I choose 7

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8 A put option gives you the right to sell within a specified time period at a specified price It is not necessary to own the asset before acquiring the right to sell it

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9 All exchange-traded options have standardized expiration dates The Saturday following the third Friday of designated months for most options Investors typically view the third Friday of the month as the expiration date

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10 The striking price of an option is the predetermined transaction price In multiples of $2.50 (for stocks priced $25.00 or below) or $5.00 (for stocks priced higher than $25.00) There is usually at least one striking price above and one below the current stock price

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11 Puts and calls are based on 100 shares of the underlying security The underlying security is the security that the option gives you the right to buy or sell It is not possible to buy or sell odd lots of options

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The right to BUY the underlying instrument at a certain price on a specified future date

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Why? You want to capitalize on an increasing trend in the spot market (bullish). The trend could be either long-term or short-term

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Example: You believe GOOG will rise towards the 500 level in about a months time. The spot rate is currently 450. You buy a GOOG Call with a one month expiry and a strike of 450. The price is 10 dollars.

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Upside: Unlimited, and calculated by: Closing spot price Strike price - premium = profit

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Example: You believe GOOG will rise towards the 500 level in about a months time. The spot rate is currently 450. You buy a GOOG Call with a one month expiry and a strike of 450. The price is 10 dollars. Upside: Unlimited, and calculated by: Closing spot price Strike price - premium = profit Ex. 480 - 450 - 10 = 20 dollars Downside: The premium (10 dollars) which will be lost if the option is Out-of-The-Money (OTM) at expiry

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Put Options

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The right to SELL the underlying instrument at a certain price on a specified future date

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Why? You want to capitalize on a decreasing trend in the spot market (bearish). The trend could be either long-term or short-term

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Example: You believe GOOG will fall towards the 400 level in about a months time. The spot rate is currently 450. You buy a GOOG Put with a one month expiry and a strike of 450. The price is 10 dollars.

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Example: You believe GOOG will fall towards the 400 level in about a months time. The spot rate is currently 450. You buy GOOG Put with a one month expiry and a strike of 450. The price is 10 dollars. Upside: Unlimited, and calculated by: Strike price closing spot price - premium = profit Ex. 450 - 400 - 10 = 40 dollars

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Example: You believe GOOG will fall towards the 400 level in about a months time. The spot rate is currently 450. You buy GOOG Put with a one month expiry and a strike of 450. The price is 10 dollars. Upside: Unlimited, and calculated by: Strike price closing spot price - premium = profit Ex. 450 - 400 - 10 = 40 dollars Downside: The premium (10 dollars) which will be lost if the option is Out-of-The-Money (OTM) at expiry

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International Business Machine

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Stock Ticker IBM Price: $164.25 Market Cap: ~200 Billion P/E: 14

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IBM has transitioned itself Very much used to be hardware, iron horse company More of a solutions-oriented company, whether it software, hardware or consulting.

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Stock has risen 12% in 2011 28% in the past 12 months. Big boost from Asia During fiscal 2010, IBM generated 23% of total sales from the Asia Pacific region. Roughly 42% of sales came from the Americas and 32% came from Europe, the Middle East and Africa. Sales, net income and earnings per share gained 4.3%, 10% and 16%, respectively, during the past 12 months. Fourth-quarter net income stretched 9.2% to $5.3 billion and EPS climbed 16% to $4.18, Boosted by a smaller float

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Gross margin steady at 54% Operating margin up from 23% to 24%. $12 billion of cash and $29 billion of debt at the quarter's conclusion, for a quick ratio of 1 and a debt-to-equity ratio of 1.2. Asia Pacific quarterly revenue extended 14% to $6.6 billion, outpacing all other regions. Bottom line: make strides in high margin services and the company is being run like a well oiled machine (no pun intended)

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Personal Experience.. TA?

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What are your questions?

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