Fugit
Some words are just fun to say. Some words look like they might be slang for certain expletive expressions. And some words, like fugit, are both.
Fugit is a calculation made by investors when they’re trying to figure out whether or not to exercise an option early. When we buy options, they have an expiration date; once that date comes, we’re committed to whatever call or put we’ve purchased. Some folks get itchy about commitment, so they’ll do some figuring to decide if it would be beneficial to exercise an option before its expiration date. They use binomial trees to get specific about the if’s and when’s.
Spoiler alert: it’s usually not beneficial to exercise options early. Really, the only time it works out is if the strike price is way higher (if we’ve got a put option) or way lower (if we’ve got a call option) than the market price of the security. “Fugit” comes from the Latin “tempus fugit,” which translates to “time flies.”
We see what they did there (if we want to exercise options early, we’ve only got so much time to do it in), but most of the time, it’s usually a better financial idea to fugit and forget it.
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Finance: What is a Strike Price?40 Views
Finance a la shmoop what is a strike price well before going
even a second further with this video be sure you've seen our Steven Spielberg [Introduction to a movie at the cinema directed by Steven Spielberg]
directed what is a stock option video here are the reviews from variety.. well
to review a stock option is the right to buy a share of stock for a set price
over a given period of time so let's say you were granted an option to buy a [Graph of amazon stock prices]
share of Amazon stock in 2015 when the stock was around 400 bucks a share the
option lasts as long as you work at the company in good standing or after 10
years have passed which ever ends first well one day you decide you want another job [Woman signing a contract]
your contract says that if you're no longer an employee with the company then
you have 90 days in which to either buy out your option that is to buy the
option and then own the stock or just forfeit the option [Woman underlining words on a contract]
well since Amazon is now at a thousand bucks a share you obviously don't want
to forfeit the option to buy that share of stock for 400 bucks but you note that
your many friends who joined apcray.com at a high price a high strike price which
creators know they're stock while they're doing a lot of option forfeiting
that is their options ended up being worthless so you've got a lot to think [Man holding out a bag of dog poo]
about here this is Amazon not apcray so you want to buy out your option so
what happens well you were granted your own options at the price Amazon stock [Amazon box falls off shelf]
was trading at the day you joined the company it was 400 bucks a share so
that's a strike price that $400 is the price you pay to buy a share of stock at
some point there in the future that strike price has nothing to do with [Protestors holding signs outside an Amazon building]
unions not working got it? all right well in order to buy that stock it's
currently trading in a thousand bucks a share
you pay Amazon 400 bucks and that buys out your option you then own the stock [Man writing a check to Amazon for 400 dollars]
that's it Amazon cancel your option then they give
you a share of actual stock which you now own for as long as you want to own [Man delivering an Amazon box]
it you can sell it immediately and make a
$600 a share profit that's a thousand bucks a share it's trading at now minus the
$400 strike price you just paid to buy out that option got it or you can hold [Grandparent bribing grand-daughter for amazon stock]
onto those shares and you know use it to bribe your grandchildren one day it's
worth like a million dollars a share
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