Options

In finance, an option is a derivative financial instrument that specifies a contract between two parties for a future transaction on an asset at a reference price (the strike). The buyer of the option gains the right, but not the obligation, to engage in that transaction, while the seller incurs the corresponding obligation to fulfill the transaction. The price of an option derives from the difference between the reference price and the value of the underlying asset (commonly a stock, a bond, a currency or a futures contract) plus a premium based on the time remaining until the expiration of the option. Other types of options exist, and options can in principle be created for any type of valuable asset.An option which conveys the right to buy something at a specific price is called a call; an option which conveys the right to sell something at a specific price is called a put. The reference price at which the underlying asset may be traded is called the strike price or exercise price. The process of activating an option and thereby trading the underlying asset at the agreed-upon price is referred to as exercising it. Most options have an expiration date. If the option is not exercised by the expiration date, it becomes void and worthless. In return for assuming the obligation, called writing the option, the originator of the option collects a payment, the premium, from the buyer. The writer of an option must make good on delivering (or receiving) the underlying asset or its cash equivalent, if the option is exercised. An option can usually be sold by its original buyer to another party. Many options are created in standardized form and traded on an anonymous options exchange among the general public, while other over-the-counter options are customized ad hoc to the desires of the buyer, usually by an investment bank

Ex.3. Depreciation. Circle the odd one out in each of the following.

1. Fixed assets could include

a) buildings b) plant and machinery c) the firm’s delivery vans

d) fuel for the vans

2. Depreciation due to physical deterioration of an asset may include

a) wear and tear b) theft c) erosion d) rot

3. Machinery becomes obsolete due to

a) new technology b) consumption

c) changes in production methods d) changes in fashion

4. Amortization is the provision for consumption of the following items

a) mortgages b) leases c) patents d) copyright

5. A provision for depletion would be used for the following items

a) mines b) buildings c) quarries d) oil wells

6. A machine could be disposed of by being

a) scrapped b) resold c) revaluated d) traded in

Ex. 4. Match the following expressions with the correct definitions.

1. human capital a) money to carry on production

and keep trading

2. risk capital b) money a company has raised from

investors who bought shares

3. share capital c) money invested in a project with a high

chance of failure

4. venture capital d) money a company borrows to start up

a new business

5. working caital e) the perceived value of people and their

skills

UNIT 7

Text. Translate the text consulting your dictionary.