Blossom Inc, purchases a call option contract on January 2, 2023, from Baird Investment Corp. The option gives Blossom the right to purchase 3,270 Laredo Corp. shares (the underlying) at $220 per share (the exercise/strike price), and it expires April 30, 2023. For the right to buy the shares at this fixed price, Blossom pays a premium of $880. This is a financial derivative because the underlying is a nancial asset the Laredo shares. At the time of the transaction, Laredo shares are trading at
Blossom Inc, purchases a call option contract on January 2, 2023, from Baird Investment Corp. The option gives Blossom the right to purchase 3,270 Laredo Corp. shares (the underlying) at $220 per share (the exercise/strike price), and it expires April 30, 2023. For the right to buy the shares at this fixed price, Blossom pays a premium of $880. This is a financial derivative because the underlying is a
nancial asset the Laredo shares.
At the time of the transaction, Laredo shares are trading at $220. If the price of Laredo shares increases above $220, Blossom can
exercise the option and purchase the shares for $220 per share. Alternatively. Blossom may sell the option to someone else.
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