Explain the Four Main Factors That Determine Call and Put

question 26

Essay

Explain the four main factors that determine call and put option prices.Illustrate your answer with data on an option trading on the ASX.

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Definitions:

Minimize Losses

Refers to the strategy of reducing the amount of money or resources wasted or not profitably used in a business or operation.

Output Units

Output units refer to the individual units of product or service produced by a business or economic system.

Purely Competitive Seller

A seller in a market where there are many buyers and sellers, with no single entity able to control the market price.

Average Variable Cost

The total variable cost of production divided by the quantity of output produced; it decreases and then increases as output increases due to economies and diseconomies of scale.