Talk:Option (finance)

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	Option (finance) was one of the Social sciences and society good articles, but it has been removed from the list. There are suggestions below for improving the article to meet the good article criteria. Once these issues have been addressed, the article can be renominated. Editors may also seek a reassessment of the decision if they believe there was a mistake.
Article milestones Date Process Result December 3, 2007 Good article nominee Listed March 16, 2009 Good article reassessment Delisted Current Status: Delisted good article

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Contents 1 Old discussion 2 Option page Redirect 3 OCC 4 Naming convention examples 5 other types 6 Rewrites 7 not broad enough 8 Tax 9 Good article review 10 Uses 11 expiration 12 future option 13 option ticker 14 Graphs do not match up horizontally with with the text = 15 Risks Section 16 Premium 17 Example 18 External links 19 Edit

[edit] Old discussion

/Archive 1

The archive contains the talk page from Option, from before this article was moved to Option (finance). I moved it because I'm moving Option (disambiguation) to Option, and that talk page was in the way, not to mention it didn't match the article it was attached to. -GTBacchus^(talk) 17:32, 3 February 2007 (UTC)

[edit] Option page Redirect

Whoaaa! The discussion page has disappeared, I can't find it! Perhaps just as well. Anyway, I think this is a good resolution of the discussion over financial options, and how the reader can better understand now the subject of all options, and where to look. Certainly I'm happy with it and I think all reasonable participants should be too. So thanks to whoever did this. JohnClarknew 20:07, 21 November 2006 (UTC)

NP, John. BTW, the old discussion page can be found here: Talk:Option. I've set up a redirect on what was the old option page. Here's a trick: type Option in the Wiki search box and hit go. At the top, click on the link that says (Redirected from Option). That prevents the redirect and let's you get back to the original page. Ronnotel 20:18, 21 November 2006 (UTC)

[edit] OCC

I believe the OCC only settles stock and index options for the US and some Canadian exchanges - not the CBOT, CME or any of the European exchanges. I think the description in the first paragraph is misleading. Anyone else with more knowledge care to comment? Ronnotel 16:11, 4 December 2006 (UTC)

I made a bit of a change in the intro, including the OCC. The intro is quite technical now in a pretty picky way. I'll suggest people try to keep up with it, in that a small change seems to affect all the different parts. Perhaps an easier way would be to make it very simple, and leave the technical stuff for later.

I think the whole article could use a bit of a tune-up or tightening up. It seems a bit flabby and hairy, e.g. the quotation and symbols section seems (to me) to be rather unimportant. Cutting a bit here and there is probably most important as there are tons of related articles. Does anybody mind if a try? Smallbones 16:25, 4 December 2006 (UTC)

please do. Ronnotel 17:31, 4 December 2006 (UTC)

[edit] Naming convention examples

in the section "Option naming conventions", at leat one example is needed. Jackzhp 17:35, 17 April 2007 (UTC)

[edit] other types

Can someone please add some explanation for the calendar spread, strip, & strap? Jackzhp 15:19, 18 April 2007 (UTC)

[edit] Rewrites

Over the past week, I've been rewriting the various sections, applying some basic copy editing and trying to make the article more like an encyclopedia article rather than a random collection of facts. Given that my changes have been left relatively in tact, I'll leap to the assumption that these changes are mostly in the right direction.

I'm getting close the end of the changes I wanted to make although I do want to go back and do much more sourcing. Does anyone have any suggestions on major topics that need better coverage? My hope is that some day in the not too distant future we can submit this article for GA review. Ronnotel 16:44, 18 June 2007 (UTC)

Over all a great job, this article has needed to be integrated for a long time - I may copyedit and nitpick (a bit) later. I put a list of options exchanges links at the end, from a previous cut - maybe they fit in this way better. Questions I may bring up later on further consideration. 1) Overall uniform semi-technical tone - maybe instead try to have a bit of very simple stuff, some more technical stuff, and then some more for the specialists (i.e. to cover a range of readers) - that's hard to do, I know, but always a consideration and you've done some of it 2) Pin risk - is this a biggy? 3) Wording on options strategies 4) Historical uses of options (I rewrote this section a long time ago, rather than throw out some good with some bad stuff) - does it now fit with the article as a whole? Just some questions that I'll be thinking about before I edit. Keep up the good work. Smallbones 12:20, 19 June 2007 (UTC)

P.S. with a "top importance" article and a "start" class, we should be very happy that this is getting a workover.

Thanks for the feedback. Please do copyedit and aggressively pick those nits wherever you find them. I agree that the tone is somewhat technical and I tried to avoid that wherever I could. However, it is my firm belief that anyone who is afraid of math should probably find something else to do rather than trade options - kind of like the way someone who doesn't like water should avoid swimming. I think the section on Risks is probably the most intimidating and I tried to keep things as simple as possible. However, talking about option risk without describing hedge parameters, was, I felt, a disservice, and I always find that a worked example can go a long way in advancing understanding. I seriously debated breaking this section into a separate page - perhaps that would help bring the tone in a little? Pin risk is not a huge issue, it can be struck but it is a topic of interest to some (we just got pinned big time this past Friday!) and it would be nice to at least keep a reference to the main page so someone who is looking can find it. Historical uses of options is definitely of interest I think, but it should be better researched and sourced. I think I've got a couple of sources lying around that I can take a look at when I start my attacking on sourcing. Thanks again! Ronnotel 12:53, 19 June 2007 (UTC)

I've put in in-line references (very good if you want theis to be a GA). Except for Cox and Rubinsteing they are basic MBA texts and might be more accessable to beginners. They may not be the best cites for a particular point, so I'm not married to the cites. I do think cites are important however. Smallbones 16:47, 20 June 2007 (UTC)

Although it is a good article, it needs a more simple-contextual introducción. It is ok that the rest begin technical and specialist, but the introduction can not be this way, Wikipedia is seen for any kind of people, and should bring at least an contextual-general introduction to them. The article flag is correct and can not go fo GA if it continues. Thanks in advance. I hope the change. —Preceding unsigned comment added by 200.108.215.226 (talk) 13:19, 18 November 2008 (UTC)

[edit] not broad enough

this article talks about specific options instruments, but what about Real Options, or talking about Debt and Equity in an options framework? Suicup 18:56, 26 September 2007 (UTC)

I believe the intent of this article is to describe financial options. It began as simply Option, but was renamed some time ago because of exactly the issue you describe. I don't think it's possible to find consensus on what options are to be able to describe them succinctly in one page. However, there are a number links to these other types of options. Clearly, there is already a page on Real Options. There is also a page on Equity derivatives and Bond options. Can you be more specific on what you'd like to see? Ronnotel 19:03, 26 September 2007 (UTC)

[edit] Tax

Isn't it a bit odd that this article is over 4000 words and doesn't mention the tax implications anywhere? calr (talk) —Preceding comment was added at 19:47, 20 November 2007 (UTC)

Hmm - interesting point. Which of the notable elements of option taxation are common across the various tax regimes and instrument classes? I'm by no means an expert - but just in the U.S. there are probably dozens if not hundreds of taxation rules, most of which are specific to U.S. tax law. I think a section on taxation would be useful, but it would need to be written for a global audience. Depending on what sort of material there is, would it make sense to break this out into a separate article? Ronnotel (talk) 20:08, 20 November 2007 (UTC)

[edit] Good article review

This is a really nicely done article, scholarly, accurate and neutral. I like it a lot. I think that it could use more inline citations, and also that some of the language may be simplified for the general reader. You may want to add a section on covered call writing, even though there is a separate article. Covered calls are the primary way retail investors engage in options trading. The comments above re tax implications are also valid. In general, good job!--Samiharris 19:19, 2 December 2007 (UTC)

The additions to the article since the above dealt with my concerns, esp. on the covered call writing, so I have made this a good article. --Samiharris 19:32, 3 December 2007 (UTC)

[edit] Uses

As the article is now GA, we should be more careful about adding major new sections. I'd like to have some discussion on the purpose of a section titled Uses. It also needs to be adequately referenced as per WP:RS. Ronnotel (talk) 23:22, 30 January 2008 (UTC)

[edit] expiration

At which date is expiration date often fixed?

Some options expires in the morning, some expires in the afternoon.

• – the option expires at the market close of the last trading day
• – the option expires at the market open of the last trading day

why this? Jackzhp (talk) 14:02, 31 March 2008 (UTC)

[edit] future option

vbv —Preceding unsigned comment added by 122.169.53.87 (talk) 10:45, 6 May 2008 (UTC)

Sorry? Zain Ebrahim (talk) 11:03, 6 May 2008 (UTC)

[edit] option ticker

For exchange traded options, they have tickers. How are thoese tickers being chosen? I think that we should explain it in the article. Jackzhp (talk) 03:59, 14 May 2008 (UTC)

It turns out we have an entire article on that, option symbol, so I linked it in the article. I'm not sure that topic justifies more explanation in this article, but a link to it is good. Thanks for the suggestion. - Taxman ^Talk 13:58, 14 May 2008 (UTC)

[edit] Graphs do not match up horizontally with with the text =

This is for the long calls, short calls, long puts, short puts part.

Moved thread to the bottom. Zain Ebrahim (talk) 19:06, 3 June 2008 (UTC)

[edit] Risks Section

The risk section is very complicated and difficult to understand. Wikipedia is used by more than just people with advance knowledge of mathematics, an attempt to make this information more non-expert friendly would be greatly appreciated. Be so empty without me (talk) 03:51, 28 June 2008 (UTC)

[edit] Premium

The word "premium" should be (shortly) explained, perhaps elsewhere.132.66.40.82 (talk) 12:43, 16 September 2008 (UTC)

[edit] Example

This is my first contribution so I hope I'm doing the right thing. The article is excellent but I feel a simple example would clarify some of the details. For example a call option with an expiry date of ddmmyy at a price of $$$. Current price is $$$ premium = $$$ and so on.--Azzol99 (talk) 04:39, 18 November 2008 (UTC) —Preceding unsigned comment added by Azzol99 (talk • contribs) 04:34, 18 November 2008 (UTC)

[edit] External links

User:205.232.183.3, I'm not sure I see the benfit of the links you have been restoring to this article. IMHO, the article seems better off without the link cruft. Can you please explain why you think these links should remain? Ronnotel (talk) 00:00, 8 January 2009 (UTC)

Options are a complicated subject. The links help better explain the subject in easy terms as opposed to just the Wiki page. —Preceding unsigned comment added by 205.232.183.3 (talk) 17:23, 8 January 2009 (UTC)

After reviewing these links, I find them unlikely to offer the reader much more insight. There are lots of links on the web that talk about options and these are in no way special. If you want to propose some potential links that you think would help the page that would be great. But please get consensus here before adding them to the article. Ronnotel (talk) 18:03, 8 January 2009 (UTC)

[edit] Edit

The introduction was deemed inaccessible to those unfamiliar with the context. I feel that the intro is now eases readers more gently into the discussion. Also, the last two intro paragraphs were not necessary for an introduction. They provided information beyond the scope of introduction.

I also added a section that gives a quick overview of the factors that influence option prices. I felt that jumping into valuation models without first discussing valuation would throw unseasoned readers through a loop. —Preceding unsigned comment added by Rainpat (talk • contribs) 20:33, 3 March 2009 (UTC)

Ronnotel, the information I attempted to add under the valuation of options is an overview of relationships between variables. This is important information for those new to options valuation. These are extensions of logic rather than new facts. However if you'd be put at ease I do have a quality source. I see your disagreement regarding the intro, however I think you might agree that its current state is inaccessible and that some of the its information is not suitable for an introduction and should be reserved for the main article. —Preceding unsigned comment added by Rainpat (talk • contribs) 21:13, 3 March 2009 (UTC)

Please understand that in no way am I disparaging your efforts. However, I was concerned that the edits introduced some loss of precision. For instance, it is more accurate to define an option as a contract rather than a privilege. Is there something in particular that you think is unaccessible? Ronnotel (talk) 21:20, 3 March 2009 (UTC)

No worries, I do understand that. I agree that an option is a contract, but I think that the word excludes real options. Most options have contracts, but not all of them. Therefore I think word "privilege" is more comprehensive, if less precise. However, upon reflection, maybe a better definition would be "An option is a right to engage in a particular decision..." with following clarifiers like "many options are simply contracts. The option is created by the writer, who then sells the option for a premium. The buyer now holds the option and may exercise it, let it expire, or resell it..." and "...other options have no contracts and are simply inherent in the circumstances. For example a farm owner has the option to develop his field into a condominium complex. The option doesn't exist as a contract, but we know it exists because the option to develop the field potentially makes it more valuable. The option therefore has a value."

My issue with the accessibility is with the last two intro paragraphs. I think they go beyond the scope of the intro and should be put into the main article. However, to be honest I only tinkered with it because of the big "this introduction lacks context" message below the heading.

Rainpat (talk) 21:53, 3 March 2009 (UTC)