@karanv_10111
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Up4
When reading from Schweser, I came across a question under the fundamental section in which Holt Industries’s Dividend payout ratio , sales growth and total debt to equity was being compared to the industry average. And this is an example of Fundamental P/E ratio comparison. Why do the same thing and have two distinct types of valuation model? @Sophie
Up3Thank you so much @Reena‌ . Please be kind enough to elaborate a bit more , I was attempting this question from Schweser , Which I marked wrong , I think the explanation for the answer was the root cause of my confusion.
Please If you could go through the explanation they gave and tell me what are they trying convey:Q: The owner of a call option on oil futures with a strike price of $68.70 :
A.can exercise the option and take delivery of the oil.
B.can exercise the option and take a long position in oil futures.
C.would never exercise the option when the spot price of oil is less than the strike priceI marked C , answer was B.
Explanation: A call option on a futures contract gives the holder the right to buy (go long) a futures contract at the exercise price of the call . /*This is where is starts making no sense to me*/It is not the current spot price of the asset underlying the futures contract that determines whether a futures option is in the money , it is the futures contract price (which may be higher).
Up2I obviously meant it is “NOT EXHAUSTIVELY EXPLAINED”
Up2Congratulations to everyone who passed . All the very best for Level 2.
Up1@Marron5 by value you mean market capitalization?
Up1Yes,I am comparing futures contract vs an option on a futures contract (on the same underlying asset).@Reena
