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":
... 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 value of any ... X = exercise price (equals $0.01) To prove that above formula is correct, we'll calculate price using Black–Scholes formula ... 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:
“A self-respecting nation is ready for anything, including war, except for a renunciation of its option to make war.”
—Simone Weil (19091943)
“I have never taken any exercise, except sleeping and resting, and I never intend to take any. Exercise is loathsome. And it cannot be any benefit when you are tired; and I was always tired.”
—Mark Twain [Samuel Langhorne Clemens] (18351910)
“There are many things a man will do, but betrayal for a price is not one of yours.”
—Jules Furthman (18881960)