exercise price

(noun)

The fixed price at which the owner of an option can purchase (in the case of a call) or sell (in the case of a put) the underlying security or commodity.

Related Terms

  • contributed capital
  • yield
  • vesting period
  • remuneration

Examples of exercise price in the following topics:

  • Stock Warrants

    • A stock warrant entitles the holder to buy the underlying stock of the issuer at a fixed exercise price until the expiration date.
    • A stock warrant is similar to a stock option in that it entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.
    • Premium (the extra amount paid for the shares when exercising the warrant as compared to the market price paid when acquiring the stock through the open market)
    • Restrictions on Exercise (American-style warrants must be exercised before the expiration date and European-style warrants can only be exercised on the expiration date.
    • They are valued at their exercise price multiplied by the specified number of common shares the warrant provides.
  • Overview of Warrants

    • A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.
    • A warrant is a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiration date.
    • Upon expiration, the warrants are worthless unless the price of the common stock is greater than the exercise price.
    • Intrinsic value: This is simply the difference between the exercise (strike) price and the underlying stock price.
    • Warrants are also referred to as in-the-money or out-of-the-money, depending on where the current asset price is in relation to the warrant's exercise price.
  • Employee Stock Compensation

    • Options, as their name implies, do not have to be exercised.
    • The holder of the option should ideally exercise it when the stock's market price rises higher than the option's exercise price.
    • There is no standardized exercise price and it is usually the current price of the company stock at the time of issue.
    • An employee may have stock options that can be exercised at different times of the year and for different exercise prices.
    • Performance or profit goals may need to be met before an employee exercises her options.
  • Options Contract

    • All options have an exercise or strike price; the price listed on the option.
    • Investor would more likely exercise the call option to buy at the strike price and sell at the spot price.
    • Investor would not exercise the call option if the strike price exceeds the spot price.
    • On the other hand, an investor would exercise a put option if the strike price exceeds the spot price.
    • Scenario 1: If the spot market price exceeds the $80 strike price, then the company exercises the call options.
  • Defining Options and Their Valuation

    • The strike price, also known as the exercise price, which is the price at which the underlying transaction will occur upon exercise.
    • The expiration date, which is the last date the option can be exercised.
    • American option – may be exercised on any trading day on or before expiration.
    • Bermudan option – may be exercised only on specified dates on or before expiration.
    • Barrier option – any option with the general characteristic that the underlying security's price must pass a certain level or "barrier" before it can be exercised.
  • Differential

    • Differential pricing exists when sales of identical goods or services are transacted at different prices from the same provider.
    • Price differentiation, or price discrimination, exists when sales of identical goods or services are transacted at different prices from the same provider.
    • In a theoretical market with perfect information, perfect substitutes, and no transaction costs or prohibition on secondary exchange (re-selling) to prevent arbitrage, price differentials can only be a feature of monopolistic and oligopolistic markets, where market power can be exercised.
    • This usually entails using one or more means of preventing any resale: keeping the different price groups separate, making price comparisons difficult, or restricting pricing information.
    • Some economists have argued that this is a form of price discrimination exercised by providing a means for consumers to reveal their willingness to pay.
  • Price Discrimination

    • Price discrimination also occurs when the same price is charged for goods with different supply costs.
    • Price discrimination's effects on social efficiency are unclear; typically such behavior leads to lower prices for some consumers and higher prices for others.
    • Price varies according to demand: larger quantities are available at a lower unit price.
    • Some economists have argued that this is a form of price discrimination exercised by providing a means for consumers to reveal their willingness to pay.
    • Construct the concept of price discrimination relative to legal concerns in pricing
  • A single-variable model for the Mario Kart data

    • Let's fit a linear regression model with the game's condition as a predictor of auction price.
    • Results of this model are shown in Table 8.3 and a scatterplot for price versus game condition is shown in Figure 8.4.
    • Summary of a linear model for predicting auction price based on game condition.
    • Scatterplot of the total auction price against the game's condition.
  • Robust statistics

    • The distribution of vehicle prices tends to be right skewed, with a few luxury and sports cars lingering out into the right tail.
    • If you were searching for a new car and cared about price, should you be more interested in the mean or median price of vehicles sold, assuming you are in the market for a regular car?
    • Complete explanations are provided in the material following Exercise 1.33.
    • 1.35: Buyers of a "regular car" should be concerned about the median price.
    • High-end car sales can drastically inflate the mean price while the median will be more robust to the influence of those sales.
  • Paired observations and samples

    • Each textbook has two corresponding prices in the data set: one for the UCLA bookstore and one for Amazon.
    • Therefore, each textbook price from the UCLA bookstore has a natural correspondence with a textbook price from Amazon.
    • Here the differences are taken as: UCLA price−Amazon price for each book.
    • It is important that we always subtract using a consistent order; here Amazon prices are always subtracted from UCLA prices.
    • Histogram of the difference in price for each book sampled.
Subjects
  • Accounting
  • Algebra
  • Art History
  • Biology
  • Business
  • Calculus
  • Chemistry
  • Communications
  • Economics
  • Finance
  • Management
  • Marketing
  • Microbiology
  • Physics
  • Physiology
  • Political Science
  • Psychology
  • Sociology
  • Statistics
  • U.S. History
  • World History
  • Writing

Except where noted, content and user contributions on this site are licensed under CC BY-SA 4.0 with attribution required.