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Describe the Main Features of Option Contracts

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Essay

Describe the main features of option contracts.What are the payoff functions of the four basic option positions that can be taken by traders? Explain the circumstances that would motivate trade in each position.


Definitions:

Centralized

A system in which decision-making authority is concentrated at the top levels of management or within a central location.

Bigger Organizations

Refers to larger entities typically characterized by a greater number of employees, structures, and complexity in operations and management.

Complex Tasks

Tasks that are multifaceted, challenging, and require a high level of skill and cognitive effort to complete.

High Formalization

refers to an organization's emphasis on structure, rules, and procedures to standardize behavior and processes.

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