Applying Options in the Classroom: Selling Calls and Puts on Grades
Journal of Financial Education, Volume 37, Spring/Summer 2011, Number 1, Pages 43-54.
20 Pages Posted: 22 Jul 2014
Date Written: November 2009
Trading simulations have become more common in the finance classroom. One problem with traditional trading simulations is that using play money as currency often creates a situation where the winning strategy is an excessively risky strategy. In this paper, we introduce an options simulation which allows students to buy a call or a put on their final exam score. Because the students pay for the options with an important currency, final exam points, they are required to fully analyze the decision to buy the option since there is a real potential loss in the purchase.
Keywords: Options, Classroom Simulation, Grades
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