9.5.2 Complete the following text using the suitable words or phrases from the box.

A	future date	E	sell
B	hedging	F	a security
C	long position	G	buy
D	conducts a hedge	H	short position

The Basic Principle of Hedging

According to the basic principle of ____(1)____, if a financial institution has bought ____(2)____ and has therefore taken a ____(3)____, it conducts a hedge by contracting to ____(4)____ that security (take a short position) at some ____(5)____. Alternatively, if it has taken a ____(6)____ by selling a security that it needs to deliver at a future date, then it ____(7)____ by contracting to ____(8)____ that security (take a long position) at a future date.

9.5.3 Complete the text. Replace the Russian words and phrases by the English equivalents.

In-the-Money and Out-of-the-Money

Selling or writing опционные контракты involves the обязательство either to deliver or to buy assets, if the buyer погашает опцион – chooses to make the trade. For this the seller (writer) receives a fee called премия по опциону from the buyer. But продавцы опционов do not expect them to be exercised. For example, if you expect the цена акции to rise from 100 to 120, you can buy a опцион колл giving the right to buy the stock at 110. If the stock price не повысится to 110, you will not погасите the option, and the продавец опциона will gain the premium. Your option will be без денег, as the stock is trading at ниже цены страйк or exercise price of 110, the price stated in the option. If с другой стороны, the цена акции rises above 110, you are в деньгах: you can исполнить опцион and you will gain the разница between the текущая рыночная цена and 110. If the market moves in an unexpected direction, the продавцы опционов can потерять enormous суммы денег.

9.5.4 Text for discussion.

a. Look up the dictionary or Unit 9 Glossary for the meaning and pronunciation of the following words and word-combinations and use them to discuss the problems outlined in the text.

To exercise an option; options trading broker; chain of events; resolution of an options contract; cease to exist; exercise request; Options Clearing Corporation or OCC; exercise notice; random selection; the underlying stock; account holders; assignees.

b. Briefly scan the text and outline the list of major points.

c. Read the text more carefully and comment on the following items using the information given in Fig. 1:

- the whole chain of events leading to the eventual resolution of an options contract;

- the importance of the Options Clearing Corporation or OCC and its functions;

- the reasons for using the random selection method in the process of clearing.