Russians are used to cold, frigid temps. The cold doesn’t phase them one bit. Neither does a Russian option: a type of perpetual put option that has no expiration date.
That’s right: a put option seller can give you the cold shoulder forever if they so desire.
Let’s break this down (like an ice block). If you need a refresher, put options are contracts where the contract holder has the right, but not the obligation, to sell their put (some stuff, like a certain commodity) at the best price the market’s ever seen.
Regular put options have expiration dates, and that’s when the holder has to decide to sell their commodity at a given price, or not. Then the contract is over. Current market prices of the commodity determine whether exercising that right to sell at the previously determined price is a good idea or not. If the commodity is more expensive on the market than in the contract, the put option holder should pass; they could sell their goods for more in the market. If the commodity price went down in the market, it means they locked in a higher selling price for their goods when they exercise the option. Cha-ching.
Russian put options can go on forever, since there’s no expiry. Time to pop open that handle of vodka, comrade. It might be awhile.
Since there’s no expiration date, Russian options are considered “exotic,” and you won’t see them very often. Not many want to be on either end of a “maybe-one-day” arrangement...like how it’s a bad idea to be on-again/off-again with a girlfriend or boyfriend indefinitely.
Since Russian options are a rare breed, you’ll only find them on over-the-counter markets. And they’re pricey; there are big potential payoffs for the option holder, since they can exercise the option whenever they want (or never).
Is it cold in here, or is it just us?
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Finance: What is a Derivative?23 Views
finance a la shmoop what is a derivative? well it's derived it's a something taken
from something else like a derivative of hot weather is thirst a derivative of [Girl takes sip of glass of water on a beach]
hunger is well you know crankiness that's diva thing you get there...
derivative of a 1/32 quarterback rating in the NFL is like serious wealth yeah
yeah discount double shmoop yeah look for it be on there with aaron
and a derivative of a stock or bond or other security is a something which
derives its value based on the performance of that underlying security
there are basically two flavors of derivative put options ie the right to [Ice cream flavors appear]
sell a security at a given price over a given time period and a call option, ie
right to buy a security at a given price over a given time period
well the price of that option is derived from the price of the security and a few
other factors like strike prices and duration and all that stuff
colonel electric the downgraded new version of General Electric is trading [Colonel Electric appears in a suit]
for 25 bucks a share a derivative of its share price is sold in the form of a
call option with a $30 strike price expiring about 90 days from now on the
third Friday of the end of that month well investors pay a price albeit
probably a small one for the right to then pay 30 bucks a share for colonel [Call option appears for colonel electric]
electric at any time in the next 90 ish days until that option expires making the bet
that the stock will go well above 30 bucks a share in that time period that
call option is thus a derivative of the colonel electric primary stock price got
it if you really want to get personal well here's the ultimate form of
derivative [Baby laying down]
Up Next
What is a put option? A put option is a type of contract that lets the investor sell shares of a stock at a certain price and within a window of ti...
What is a call option? A call option is a type of contract that lets the investor buy shares of a stock at a certain price and within a window of t...