Low Exercise Price Option
In 1995 the Australian Stock Exchange started listing of new exchange traded option product called a Low Exercise Price Option (LEPO). A LEPO is a European style call option with a low exercise price of $0.01 and a contract size of 1000 shares to be delivered on exercise.
LEPOs are traded on margin. The premium is close to the whole share price, and a trader only posts margin, not the full price. Both the buyer and the seller are margined, all positions are marked-to-market daily. LEPOs work like a futures contract.
Other articles related to "low exercise price option, price, exercise":
... The current value of a contract is equal to the current price of the underlying share compounded by the risk-free interest rate, less the accumulated ... X = exercise price (equals $0.01) To prove that above formula is correct, we'll calculate price using Black–Scholes formula ... distribution function for a standard normal distribution For a LEPO an underlying price is very big compare to exercise price X ...
Famous quotes containing the words option, exercise and/or price:
“Our passional nature not only lawfully may, but must, decide an option between propositions, whenever it is a genuine option that cannot by its nature be decided on intellectual grounds; for to say, under such circumstances, Do not decide, but leave the question open, is itself a passional decisionjust like deciding yes or noand is attended with the same risk of losing the truth.”
—William James (18421910)
“What exercise is to the body, employment is to the mind and morals.”
—Henry David Thoreau (18171862)
“To me a book is a message from the gods to mankind; or, if not, should never be published at all.... A message from the gods should be delivered at once. It is damnably blasphemous to talk about the autumn season and so on. How dare the author or publisher demand a price for doing his duty, the highest and most honourable to which a man can be called?”
—Aleister Crowley (18751947)