Introduction
Although futures1 prices are widely quoted throughout the media each day, the industry is _disibledevent=8+0.25
In real life options almost always trade above intrinsic value. If you are wondering, we just picked the numbers for this example out of the air to demonstrate how options work.
Types of Options
There are two main types of options:
American options can be exercised at any time between the date of purchase and the expiration date. The example about Cory's Tequila Co. is an example of the use of an American option. Most exchange-traded options are of this type.
European options are different from American options in that they can only be exercised at the end of their life.
The distinction between American and European options has nothing to do with geographic location.
Long-term Options
So far we've only discussed options in a short-term context. There are also options with holding times of one, two, or multiple years, which may be more appealing for long-term investors.
These options are called LEAPS （which stands for Long-term Equity Anticipation Securities）. By providing opportunities to control and manage risk or even speculate, they are virtually identical to regular options. LEAPS, however, provide these opportunities for much longer periods of time. Although they are not available on all stocks, LEAPS are available on most widely-held issues.
Exotic Options
The simple calls and puts we've discussed are sometimes referred to as"plain vanilla" options. Even though the subject of options can be difficult to understand at first, these"plain vanilla" options are as easy as it gets！