In the presentation We tried to make clear that finance options and everyday options derive from the same roots. People don't really feel finance options and the finance market itself as an everyday and nearby phenomenon. On the contrary, during a day dozens of times we instinctively use many complex everyday options in order to prepare ourselves for unsure future cases. We just do not appreciate that sometimes when we state: “next Wednesday evening we will go to a restaurant” we sometimes add the following phrase: “if nothing comes up on that day”. We can hardly notice that we have changed our agreement, which contains right + commitment, in a way that is preferable to us: I will go if I feel like but it is not necessary to go if I want to watch the Real Madrid match at home. With this half phrase we have gained an option for ourselves. It is totally different when we just do not go there on Wednesday evening.
We instinctively like options. We often like people, objects, situations because they also provide protective and comfortable options for us. We like cars because they are fast and comfortable. And in comparison with the train it has an advantageous option that we do not have to keep ourselves to a determined timetable. If we compare it with its ancestor, the horse, then the option is that the car doesn't require to be fed regularly. It often happens that, however, the train is available to bring us to the same place but we chose the car, despite the plus costs and that we have to drive it, because of its mobility.
The finance options' prices show how risky we feel the following period and how big stagnations are expected on the stock and exchange markets and for the interest rates. The only way to get reliable information on these effects is to set up option markets.
Put options allow us to reduce the potential losses coming of our share purchases without cutting off the way to reach the advantages coming of price rises. Call and put options can be substituted with appropriate purchasing and selling strategies. Their characteristic is that we continuously buy in case of a price rise and sell when the price falls, in spite of handling the portfolio on an all or nothing basis.
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