WHAT OPTIONS ARE.

Dominion, Volume 4, Issue 1073, 11 March 1911, Page 5

WHAT OPTIONS ARE.

Options are a mode of speculating, chieilv in stocks and shaies, which is intended to limit, tho speculator s risk. It consists in paying a sum down for tho right to "put" or "call" a given amount of stock at a fixed future da e, the price also being fixed at the time tho contract is entered into. For example, suppose> « speculator has tho idea that Brazilian 18S9 Bonds aro dear at 75, tho price they Stand at when he enters on an operation in "options." With this idea he will got his broker to buy the option to put i.e.. to deliver, say, ,£IO.OOO of these bonds At 75 a month froru date, or on the last day of the month, or two months henco. iust as may be desired. Where risks of fluctuations are great, the price of the "option" may be high, 1 per cent on tho nominal amount, of the transaction, or 2 ner c°nfc, in or© or loss as the niaj be Whatever the nrico, it is pai*l down nt once, and the buyer is then in the nositinn to play with the market. If Brazilian Bonds fall, he can buy Ins £10 000 worth, knowing that he can deliver them at 75 at the end of the term of his option; if they go up. so that ho 'never gets a chance to do fins, then he aban'lons his rieht to "put" or deliver the bonds on option dov, and loses of r oMv?e, the money paid fov that right. The double operation of "put" and "call" may be contracted for in the soma wav. generallv at double the price of a single operation; and on these bargains great speculations may be entered into.