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Option expiration and price | Finance & Capital Markets | Khan Academy

Video vocabulary

relate

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US / rɪ'leɪt /

UK / rɪˈlet /

A2
  • verb
  • To demonstrate a logical relationship between
  • To understand or sympathize with, e.g. a problem
  • To tell a story, or tell about a particular event

will

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US / wɪl /

UK / wɪl /

A1
  • noun
  • Desire or choice of someone
  • Document saying who gets your money when you die
  • Strong desire to do something; determination
  • Desire to do something; strong wish to do
  • other
  • Used with verbs to express the future
  • verb
  • To leave property to someone after your death
  • To use mental effort to make something happen
  • Am (is, are) likely to do
  • To influence someone to do something
  • To make something happen by strongly wanting it

day

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US / deɪ /

UK / de /

A1
  • noun
  • A period of 24 hours beginning at midnight
  • The period of time when it is light outside
  • Person's name

strike

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US / straɪk /

UK / straɪk /

A2
  • noun
  • A punch or hit
  • Fact of not hitting the ball when playing baseball
  • Refusal to work to get more pay, protest something
  • verb
  • To hit something
  • To suddenly become (e.g. rich)
  • To have an idea occur to you

third

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US / θɜ:d /

UK / θɜ:rd /

A1
  • adjecitve
  • 3rd: Number after second

sell

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US / sel /

UK / sɛl /

A1
  • verb
  • To exchange something for money
  • To persuade people to do, like or agree

either

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US / ˈaɪðə(r) /

UK / ˈiðɚ, ˈaɪðɚ /

A1
  • adjecitve
  • One of two (used when there is a choice of two)
  • adverb
  • (After negative statements) likewise, in addition
  • conjunction
  • Used as the first of two connected things
  • determiner
  • Used as the first of two connected things
  • pronoun
  • The one or the other

here

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US / hɪə(r) /

UK / hɪr /

A1
  • adverb
  • In this place; at this location, position or time

imagine

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US / ɪ'mædʒɪn /

UK / ɪˈmædʒɪn /

A1
  • verb
  • To think creatively about; form mental picture of

while

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US / waɪl /

UK / hwaɪl, waɪl /

A1
  • conjunction
  • In spite of the fact that; although
  • During the time that; at the same time
  • noun
  • Short amount of time

trade

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US / treɪd /

UK / treid /

A2
  • noun
  • A specific industry, e.g. shoe making
  • Action of buying and selling things in business
  • The buying and selling of goods and services
  • Exchanging something for something else
  • Job often requiring physical skills, e.g. plumbing
  • verb
  • To buy, sell and exchange goods in business
  • To give something in return for something else

both

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US / bəuθ /

UK / boθ /

A1
  • determiner
  • Used to refer to two things at the same time
  • pronoun
  • Used to refer to two things at the same time

hold

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US / həʊld /

UK / hold /

A1
  • noun
  • Section of a ship or plane used for storing things
  • Influence or power held over someone
  • Place of support for hands or feet when climbing
  • verb
  • To agree to keep something for someone
  • To have the capacity to support/contain something
  • To control an area and protect it from attack
  • To not allow someone to leave a place
  • To cause an event to happen at a place or time
  • To use hands or arms to carry or keep something
  • To have a specific quality or property
  • To keep an image, belief or feeling in your mind
  • To have or own something
  • To wait before being able to talk on the phone
  • To limit the movement of someone in a sport

chart

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US / tʃɑ:t /

UK / tʃɑ:rt /

B1
  • noun
  • Drawing showing information in a clear way
  • Map of the sea or stars
  • verb
  • To make a plan for future action
  • To make a map of
  • To keep a record of developments over time

electric

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US / ɪˈlektrɪk /

UK / ɪˈlɛktrɪk /

A2
  • adjecitve
  • Creating a feeling of excitement
  • Using electricity

they

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US / ðeɪ /

UK / ðe /

A1
  • pronoun
  • Two or more people, animals, or things

april

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US / ˈeɪprəl /

UK / ˈeɪprəl /

A1
  • noun
  • 4th month of the year
  • Person's name

all

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US / ɔ:l /

UK / ɔl /

A1
  • adverb
  • Completely; totally
  • determiner
  • Being every one of something
  • pronoun
  • 100% of something; the complete amount

who

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US / hu: /

UK / hu /

A1
  • pronoun
  • Which person
  • Used to introduce information about people

way

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US / weɪ /

UK / we /

A1
  • adverb
  • Used to emphasize the amount of something
  • noun
  • Particular aspect of something being thought about
  • One of various choices that could be made
  • Particular existing condition or state
  • (Often long) distance or length of time
  • How something is done
  • Route to go to a place
  • Small street
  • Usual behavior, emotions or habits of someone

bit

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US / bɪt /

UK / bɪt /

A1
  • noun
  • Device put in a horse's mouth to control it
  • Small piece of something
  • verb
  • (E.g. of fish) to take bait and be caught

general

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US / 'dʒenrəl /

UK / ˈdʒɛnərəl /

A1
  • adjecitve
  • Widespread, normal or usual
  • noun
  • Top ranked officer in the army

look

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US / lʊk /

UK / lʊk /

A1
  • noun
  • Person's beauty or physical attractiveness
  • Particular style of dress, clothes, or appearance
  • The way someone, something appears to be
  • Act of searching for or examining something
  • verb
  • To appear to be; seem

nice

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US / naɪs /

UK / naɪs /

A1
  • adjecitve
  • Being attractive or of high quality or value
  • Good or enjoyable
  • Being kind or friendly

underlie

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US / ˌʌndəˈlaɪ /

UK / ˌʌndərˈlaɪ /

B1
  • verb
  • To be the basis, foundation or cause of something
  • To lie or exist beneath

option

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US / 'ɒpʃn /

UK / ˈɑpʃən /

A2
  • noun
  • A choice
  • Right to buy or sell at a certain price and time

least

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US / li:st /

UK / list /

A1
  • adverb
  • In the smallest or lowest way
  • noun
  • Something that is of the lowest or smallest degree

right

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US / raɪt /

UK / raɪt /

A1
  • adjecitve
  • Correct or true
  • The south side of you looking at the rising sun
  • adverb
  • Exactly in a place or time
  • Being appropriate for a particular event
  • In a straight or direct manner
  • noun
  • Something you are legally or morally allowed to do
  • Ideal of what is just and good
  • Political view based on conservatism
  • verb
  • To fix something previously wrong or unjust
  • To make upright, as a boat that has turned over

value

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US / 'vælju: /

UK / ˈvælju /

A1
  • noun
  • Importance you attach to something
  • Some information expressed as a number
  • Stated price of something; worth
  • verb
  • To place a high importance on something
  • To say how much money something is worth

even

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US / 'i:vn /

UK / ˈivən /

A1
  • adjecitve
  • Being equal in influence, power, possibility etc.
  • Being divided equally or fairly
  • (Of teams/contest) with similar chances of success
  • Smooth, level, or regular
  • Can be divided by 2; ending in 2, 4, 6, 8, or 0
  • At a regular, equally steady manner
  • Remaining steady and unchanging
  • adverb
  • (When this is surprising) as well; too
  • (Used to compare two things/stress the difference)
  • verb
  • To make something level; to flatten
  • To make something equal

like

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US / laɪk /

UK / laɪk /

A1
  • adjecitve
  • Being equal in status or kind to something else
  • Similar; the same
  • adverb
  • For example
  • preposition
  • Used as a filler; used to ad emphasis
  • In a way similar to the way something is done
  • Such as; for example
  • verb
  • To want to
  • To find something pleasing; to prefer something

that

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US / ðæt /

UK / ðæt, ðət /

A1
  • adjecitve
  • The person or thing being talked about
  • Used to identify something both the speakers know
  • adverb
  • Used to reinforce adjectives and adverbs
  • To such a degree
  • conjunction
  • Used to connect a noun clause
  • Used to introduce an adverbial clause
  • Used to introduce a noun clause
  • determiner
  • Used as a noun to refer to something
  • pronoun
  • Referring an object far away
  • Used to refer to the relative pronoun ‘which’

what

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US / wɒt /

UK / hwɑt, hwʌt, wɔt, wʌt,hwət, wət /

A1
  • pronoun
  • Thing or things that; the same kind as
  • Used to emphasize something you are about to say
  • adjecitve
  • Used to refer to a particular amount, or number
  • Used to place emphasis on a particular quality
  • adverb
  • To a certain degree
  • determiner
  • Question words used for asking for information
  • exclamation
  • Used to express excitement, shock, or surprise
  • Used to ask people to repeat something they said

get

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US / ɡet /

UK / ɡɛt /

A1
  • verb
  • To become affected by illness or disease
  • To begin to feel or understand an emotion or idea
  • To send or bring someone or something home, etc.
  • To go somewhere to obtain something
  • To (cause to) do a particular thing
  • To obtain, receive or be given something
  • To currently have
  • To prepare for use
  • To understand something being said or read

first

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US / fɜ:st /

UK / fɚst /

A1
  • adjecitve
  • 1st; Coming before all others in time or place
  • noun
  • Something that has not happened before
  • Position of the winner of a competition

own

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US / əʊn /

UK / on /

A1
  • adjecitve
  • Belong to oneself
  • determiner
  • Yours, his, hers, etc.; not belonging to another
  • pronoun
  • (Something) belong to myself
  • verb
  • To have something as your property

profit

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US / 'prɒfɪt /

UK / 'prɑ:fɪt /

A2
  • noun
  • Benefit from doing something
  • Money earned from sales, after costs are deducted
  • verb
  • To be a benefit to someone
  • To earn money from something

similar

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US / ˈsɪmələ(r) /

UK / ˈsɪməlɚ /

A1
  • adjecitve
  • Nearly the same; alike

friday

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US / ˈfraɪdeɪ /

UK / ˈfraɪdeɪ /

A1
  • noun
  • Fifth day of the week; the day after Thursday

then

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US / ðen /

UK / ðɛn /

A1
  • adverb
  • A time that is not now
  • Following another thing in time or arrangement
  • Following on reasonably from what was just stated
  • At that time, not now

one

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US / wʌn /

UK / wʌn /

A1
  • pronoun
  • You; we; people in general; someone
  • The thing or person previously referred to
  • adjecitve
  • Used to refer to people generally
  • Being a strong example of (something mentioned)
  • number
  • Number 1

let

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US / let /

UK / lɛt /

A1
  • verb
  • To allow someone to do something
  • Introducing a suggestion to do something together
  • To rent a house, etc. to others

the

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US / ðə /

UK / ðə /

A1
  • article
  • Used to refer to something already mentioned
  • Used to show there is only one of something
  • determiner
  • Used to describe all of a family

vary

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US / ˈveəri /

UK / ˈveri /

A2
  • verb
  • To change something and make it different
  • To be changeable, both up and down

price

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US / praɪs /

UK / praɪs /

A1
  • noun
  • Person's name
  • Cost of something in money
  • verb
  • To determine or set the cost of something

become

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US / bɪ'kʌm /

UK / bɪˈkʌm /

A1
  • verb
  • To begin to be; grow to be; develop into
  • To be suitable for a particular job or role

same

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US / seɪm /

UK / sem /

A1
  • adjecitve
  • Being equal in quality and amount
  • Identical; not different
  • Not changing; constant

can

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US / kæn /

UK / kən,kæn /

A1
  • noun
  • A metal container for storing food
  • other
  • Able to; have the skill to; have the time to
  • verb
  • To have permission to
  • To be possible to do
  • To preserve food by sealing it in a metal container

want

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US / wɔnt /

UK / wɑnt, wɔnt /

A1
  • noun
  • Something you desire or wish for
  • State or condition of poverty
  • verb
  • To desire or wish for something; hope for a thing

now

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US / naʊ /

UK / naʊ /

A1
  • adverb
  • At the present time or moment
  • Right away or in the next possible moment
  • Used to refer to something that just happened
  • Time between the present and a moment in the past
  • conjunction
  • Resulting from or because of something

compare

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US / kəm'peə(r) /

UK / kəmˈpɛr /

A1
  • verb
  • To consider how similar and different things are

stock

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US / stɒk /

UK / stɑk /

B2
  • adjecitve
  • (E.g. of a response) standard; usual; not original
  • noun
  • Animals such as cattle kept for breeding
  • Tasty liquid added to stews, soups etc.
  • Merchandise; goods kept by a business for sale
  • Piece of a business, bought in the form of shares
  • verb
  • To keep some of, as items for sale

worthless

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US / ˈwɜ:θləs /

UK / ˈwɜ:rθləs /

B2
  • adjecitve
  • Being of no value; without positive aspects
  • Having no importance or value

would

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US / wʊd /

UK / wʊd /

A1
  • other
  • Used to indicate something imagined
  • Used to ask or request something politely
  • Verb used to indicate possibility, request etc.
  • Used to indicate a preference
  • Used to indicate a reaction
  • Indicates something that occurred repeatedly
  • Used to indicate willingness or ability to do

not

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US / nɒt /

UK / nɑt /

A1
  • adverb
  • Word indicating the negative
  • (Used to form the negative of verbs)

maybe

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US / ˈmeɪbi /

UK / ˈmebi /

A1
  • adverb
  • Possibly but not certainly; perhaps

but

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US / bət /

UK / bʌt,bət /

A1
  • conjunction
  • Used before you say something different, opposite

from

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US / frəm /

UK / frʌm, frɑm,frəm /

A1
  • preposition
  • Starting at a particular place, time or level

out

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US / aʊt /

UK / aʊt /

A1
  • adverb
  • No longer stylish (e.g. fashion)
  • Away from home, business, or the usual place
  • In a direction/movement away from inside or center
  • noun
  • Act when a batter cannot continue playing
  • verb
  • To tell people a secret

over

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US / 'əʊvə(r) /

UK / ˈovɚ /

A1
  • adverb
  • Finished; no longer happening
  • Towards the ground/away from a standing position
  • noun
  • A set of six consecutive balls bowled in cricket
  • other
  • Finished
  • preposition
  • Showing the relation when a thing is above another
  • On or covering something
  • Above or across something
  • More than you need
  • From one side to the other
  • In the direction of; toward

call

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US / kɔ:l /

UK / kɔl /

A1
  • noun
  • A order or request for action
  • The sound an animal makes, often when in danger
  • A correct prediction, e.g. a decision in a game
  • A short visit to a place or person
  • A decision by a referee or umpire in a game
  • verb
  • To make a request or order for action
  • (Animal) to make sounds to warn of danger
  • To announce the date of an election
  • To make a judgment about something
  • To give someone or something a name
  • To guess in advance the result or outcome
  • To visit a place or person for a short time
  • To phone someone
  • To speak, announce or shout in a loud voice

far

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US / fɑ:(r) /

UK / fɑr /

A1
  • adjecitve
  • A long way away
  • Being a long way away
  • adverb
  • To a large degree or extent

owner

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US / ˈəʊnə(r) /

UK / ˈoʊnə(r) /

A1
  • noun
  • Person who owns or has something

where

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US / hwɛə /

UK / hwɛr, wɛr /

A1
  • conjunction
  • At or in the place which
  • In whatever place
  • pronoun
  • Word you use to ask the location of something

and

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US / ənd /

UK / ənd, ən,ænd /

A1
  • conjunction
  • Used to refer to two or more things
  • Plus; in addition; on top of that
  • Used to introduce an action that follows another

money

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US / 'mʌnɪ /

UK / ˈmʌni /

A1
  • noun
  • Coins or notes we use to pay for things

until

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US / ənˈtɪl /

UK / ʌnˈtɪl /

A1
  • conjunction
  • Up to; to a time when something happens
  • preposition
  • Before (a specific time)

something

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US / ˈsʌmθɪŋ /

UK / ˈsʌmθɪŋ /

A1
  • adverb
  • In some degree or measure
  • noun
  • a person or thing of some value or consequence
  • pronoun
  • Thing that is not yet known or named
  • Approximately

completely

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US / kəmˈpli:tli /

UK / kəmˈpliːtli /

A1
  • adverb
  • In every way or as much as possible

only

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US / ˈəunli /

UK / ˈonli /

A1
  • adverb
  • Just one; just that amount or thing; not more than
  • Not very important or serious
  • Just that type of thing, person
  • Short time ago; not before a certain time
  • conjunction
  • Except; but

two

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US / tu: /

UK / tu /

A1
  • number
  • 2

for

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US / fə(r) /

UK / fɔr,fə /

A1
  • preposition
  • Used to show the purpose, or need of something

why

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US / waɪ /

UK / hwaɪ, waɪ /

A1
  • adverb
  • Question word to ask for a reason
  • exclamation
  • (Used to express surprise or approval)

situation

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US / ˌsɪtʃuˈeɪʃn /

UK / ˌsɪtʃuˈeʃən /

A1
  • noun
  • Place, position or area that something is in
  • Circumstance or condition surrounding an event
  • An unexpected problem or difficulty

much

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US / mʌtʃ /

UK / mʌtʃ /

A1
  • adjecitve
  • Very; to a high level or degree
  • adverb
  • A lot; large amount; a high degree of
  • Nearly; basically
  • On many occasions; often
  • noun
  • A large amount; a great quantity

probability

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US / ˌprɒbəˈbɪləti /

UK / ˌprɑ:bəˈbɪləti /

A2
  • noun
  • What the chances are that something will happen

exact

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US / ɪɡ'zækt /

UK / ɪɡˈzækt /

A2
  • adjecitve
  • Completely correct; accurate; specific
  • verb
  • To get something, sometimes using force

well

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US / wel /

UK / wɛl /

A1
  • adjecitve
  • Being in a fortunate, good condition or state
  • Healthy and in good condition
  • adverb
  • In an acceptable, proper, or successful manner
  • In a complete, total, or full manner
  • A great and considerable degree
  • In a successful way, in a good or satisfactory way
  • exclamation
  • Used to begin or continue a particular statement
  • Used to show you want to start saying something
  • Used to express that you are waiting for a reply
  • You say this to change the topic of a conversation
  • Used to indicate you are making a final remark
  • noun
  • Long deep hole in the ground to get water
  • verb
  • To cause your eyes to fill with tears

those

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US / ðəʊz /

UK / ðoz /

A1
  • determiner
  • The people or things we are talking about
  • pronoun
  • The objects far from the speaker

expiration

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US / ˌekspəˈreɪʃn /

UK / ˌɛkspəˈreʃən /

B2
  • noun
  • Coming to an end of a period, validity

someone

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US / ˈsʌmwʌn /

UK / ˈsʌmˌwʌn, -wən /

A1
  • pronoun
  • Person who is not known or named

continue

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US / kən'tɪnju: /

UK / kənˈtɪnju /

A1
  • verb
  • To do something without stopping, or after pausing
  • To start doing again after a break, pause, or stop

should

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US / ʃʊd /

UK / ʃʊd /

A1
  • other
  • Used to indicate what is proper or reasonable

capture

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US / 'kæptʃə(r) /

UK / ˈkæptʃɚ /

B1
  • verb
  • To attract and hold e.g. interest, attention
  • To record, tape, or film something
  • To catch and prevent from being free
  • To take control of a place or object by force

plus

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US / plʌs /

UK / plʌs /

A2
  • noun
  • A benefit or advantage
  • preposition
  • In addition; add
  • In addition to; Indicates a number above
  • Having a value greater than zero

retain

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US / rɪ'teɪn /

UK / rɪˈten /

A2
  • verb
  • To continue to have or use; keep the quality of
  • To keep one thing inside another for a time
  • To memorize information

reason

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US / 'ri:zn /

UK / ˈrizən /

A1
  • noun
  • Ability to think about facts and form a judgment
  • Explanation for why something occurred or was done
  • verb
  • To think and make conclusions in a logical manner

scenario

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US / sɪˈnɑː.ri.əʊ /

UK / səˈner.i.oʊ /

B1
  • noun
  • An imagined sequence of events in a plan/project

how

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US / haʊ /

UK / haʊ /

A1
  • adjecitve
  • To what degree? in what amount?
  • adverb
  • (Used to explain the way to do something)
  • exclamation
  • For what purpose or reason?
  • (Used to ask someone or something's condition)

you

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US / jʊ /

UK / ju /

A1
  • pronoun
  • Person someone is speaking or writing to
  • Person or people in general

able

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US / 'eɪbl /

UK / ˈebəl /

A2
  • adjecitve
  • Skilled; good at something
  • Having the ability to do something

december

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US / dɪˈsembə(r) /

UK / dɪˈsɛmbɚ /

A1
  • noun
  • The 12th month of the year

this

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US / ðɪs /

UK / ðɪs /

A1
  • adjecitve
  • Used to indicate something already been discussed
  • Used to indicate something happening around now
  • adverb
  • An indication by a physical motion or gesture
  • A specific amount of
  • determiner
  • Person, thing, or idea near you
  • pronoun
  • Person, thing that has already been discussed

make

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US / meɪk /

UK / mek /

A1
  • noun
  • Product made by a particular company; brand
  • verb
  • To arrange or prepare something e.g. dinner
  • To get to (a place) on time
  • To gain the status of (teacher, lawyer, etc.)
  • To create something by putting things together
  • To earn a certain amount of money at a job
  • To cause or force a person to do something
  • To cause something to happen or be formed

clear

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US / klɪə(r) /

UK / klɪr /

A1
  • adjecitve
  • Empty; without anything in it or on it
  • Being certain and without doubt
  • Being without any streaks, spots, or cracks
  • Easy to understand; well-explained; obvious
  • adverb
  • Completely; entirely; through the whole of
  • Away from; free from
  • verb
  • To recover from or remove a problem
  • To get rid of the entire contents of
  • To give permission for something to happen
  • To make a place or surface empty by removing
  • To prove that someone is not guilty or to blame

could

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US / kəd /

UK / kʊd /

A1
  • other
  • Past form of 'can' to mean have ability
  • Used to ask for something politely, or to offer

enjoy

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US / ɪnˈdʒɔɪ /

UK / ɛnˈdʒɔɪ /

A1
  • verb
  • To take pleasure in something

draw

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US / drɔ: /

UK / drɔ /

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  • noun
  • Something that attracts people to visit a place
  • A lottery or prize
  • Result of a game, contest where the score is equal
  • verb
  • To attract attention to someone or something
  • To get closer to or approach something or someone
  • To influence a person's involvement in something
  • To move an object by pulling
  • To create an image using pen or pencil and paper
  • To take one thing out of a container, etc.
  • (Of 2 teams) to finish a game with the same score

see

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US / si: /

UK / si /

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  • verb
  • To go on a date with someone
  • To predict whether something is, or will be true
  • To understand what someone says
  • To use your eyes to look at something
  • To visit a place often for sightseeing or pleasure
  • To visit or meet with someone
  • To find out by waiting or looking
  • To watch (a game, movie or TV show)

with

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US / wɪð /

UK / wɪð, wɪθ /

A1
  • preposition
  • As an employee of a certain company
  • Against something or someone
  • By using something as a means
  • Due to; because of
  • Including
  • Possessing as a feature
  • Related to
  • (Of the manner/attitude by which you do something)
  • Used to express that people or things are together

exercise

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US / 'eksəsaɪz /

UK / ˈɛksɚˌsaɪz /

A2
  • noun
  • Physical activity to increase health and strength
  • Set of questions in a text book
  • verb
  • To work out to become stronger and healthier
  • To retain your ability or practice your skills

have

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UK / hæv /

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  • verb
  • To drink, smoke, eat or use something
  • To experience the effects of something
  • To organize an event, or join in an activity
  • To own, possess, or hold something
  • To cause to happen or produce a particular effect

last

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US / lɑ:st /

UK / læst /

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  • adjecitve
  • Most recent; the latest
  • The one before
  • adverb
  • Final; with nothing following; after all others
  • Most recent; the latest
  • determiner
  • The one at the end
  • verb
  • To remain or continue for a certain period of time

explore

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US / ɪk'splɔ:(r) /

UK / ɪkˈsplɔr /

A2
  • verb
  • To examine something in detail to learn about it
  • To travel to a place to discover more about it
  • Subtitles section
  • Let's explore a bit how the price of an option can vary, or how it can relate to the actual expiration date.
  • So what I'm going to do is compare two similar options with the underlying stock being General Electric.
  • And they're going to be the same in every way, except one is going to have a further out expiration date.
  • So let's compare this call option right here.
  • So this is a call option on GE with a $17 strike price.
  • So it's the option to buy GE stock at $17.
  • And it has an April, 2011 expiration.
  • So it's going to expire, or the last day of trading that you could trade this option, will be the third Friday in April.
  • Let's compare that with an option that has the same strike price, but has a December, 2011 expiration.
  • So we're going to look for $17 strike price right over here.
  • And you can see right when you compare the options that the one that has a further out expiration cost more.
  • This one costs $3.25, while this one only cost $2.36.
  • And the reason why it costs more is because you get to retain the option for longer.
  • So you could imagine, $17.
  • Let's say that $17 is right over here.
  • Let me draw a hypothetical stock chart.
  • So let's say that $17 is right over here.
  • And so you could imagine, let's say, that you have both of those options.
  • Or you have the option to have either one of those options.
  • And let's say that the stock does something like that.
  • Well, it's going to be in the money.
  • You have the right, if you own either one of those options, you have the option to buy the stock at $17 and then sell it at whatever price this is.
  • Maybe this price over here is like $20 something.
  • So you would make money.
  • But if you have the option with a closer expiration, with the April, 2011 expiration, you have to exercise the option right now.
  • You would have to exercise it right now and close out the option.
  • If you had the longer dated option, you could do it.
  • You could do the exact same thing that this owner of an April, 2011 option has.
  • Or you can hold the option and maybe see if the stock continues to go up.
  • Or you could imagine a downside scenario.
  • Maybe the stock does something like this, where it goes out of the money.
  • Someone who holds the closer dated option, the one that expires first, they'll be completely out of the money.
  • The option would be worthless on this date.
  • But if you have the longer expiration, if your option does not expire until December of 2011, then you could hold it.
  • And maybe, maybe the stock will do something nice.
  • There's some probability that it will one day become in the money.
  • I want to make it clear.
  • Even if you have this situation here, and you hold the longer dated option-- you have the option that's going to expire in December-- you still would not want to exercise it.
  • Because there is someone who would still enjoy all of this optionality of the future.
  • So what you're better off doing, instead of exercising the option, you're better off selling the longer dated option right over there.
  • And you should be able to capture at least as much profit as you would from exercising the option, plus capturing whatever value the buyer sees in the future optionality.