OPTIONALITY

I used to trade options based on stocks. These were known variously as call options and put options. You might be familiar with employee stock options: the employer gives employees the right to buy company shares at a fixed (usually discounted) price. It gives people ownership. But I digress.

There is inherent optionality in life. Options typically have a fixed expiry date. So does life. It typically has what is known as the strike price, this is the price from which the value of the option is calculated against. We could regard this as where we are at at birth for example. In a call option, the higher the value of the stock, the higher the value of the option. This is typically intrinsic value + time value. So during your lifetime, you have a fixed period of time to create value. You could measure this in $ earned in a lifetime for example.

On a balance sheet, you need to depreciate assets eg. computers. We all know that a computer is not going to last forever. In fact, even if it works fine, it will be incompatible with a lot of new software etc. in only a year's time. So suffice it to say that things don't last forever. Thus they ALL have optionality: a fixed period of time to be of value or not.

So when we expire, will we expire worthless? Or will we expire with a lot of intrinsic value......for those puzzled by this, I'll try and expand upon this concept in due course.

Thanks for reading.