From the course: Behavioral Finance Foundations

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Call options and skewness

Call options and skewness

From the course: Behavioral Finance Foundations

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Call options and skewness

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- [Instructor] Call options are a type of investment that we can use to capitalize on our preference for skewness, our desire to win the lottery, if you will, to try to capture that positive tail risk. In other words, call options can help us to position ourselves for outside gains on the off chance that a stock does really well. Let me show you what I'm referring to. Now, I'm here on the CNBC page for Microsoft. What I want to do is look at the Options tab, so I'll come over and click Options. And then I'm going to scroll down. And in particular, I'm only interested in what are called call options at this point in time. Now, call options give us the right, but not the obligation to buy a stock at a particular price any time in the future up to a particular point in time. So let's pretend that I'm interested in call options on Microsoft that will expire in January of 2020. So I'm selecting just those call options.…

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