Categories
Guides
Calls, puts, strikes, expiry and how options are priced.
10 entries
1600s–1790s
Shares trade in coffee houses and bourses, the first bubbles burst, and governments borrow from the public.
Confusion of Confusions, written by Joseph de la Vega in 1688, is the oldest known book about stock trading. It describes the Amsterdam market in VOC shares, its rumours, panics and tricks.
It also describes options: paying a premium now for the right to buy or sell shares at a set price by a set date, so a trader could limit a loss to that premium.
💡 Why it made sense then
Traders wanted to bet on a price or protect against a move without putting up the full price of the shares.
Ideas it gave us
A call option is a contract that gives its buyer the right, but not the obligation, to buy a stock at a set price (the strike) before or at a set date. Buyers profit when the stock rises above the strike by more than the premium paid.
🎮 Once enough shares have traded, each profile gets calls and puts at set strikes, expiring on Fridays, settled in play money.
Open the full entry →A put option is a contract that gives its buyer the right to sell a stock at a set price (the strike) before or at a set date. Buyers profit when the stock falls below the strike by more than the premium paid.
🎮 Puts on a person pay out if their share price ends below the strike at Friday's expiry.
Open the full entry →The strike price is the fixed price at which an option lets its holder buy (for a call) or sell (for a put) the underlying stock.
🎮 Each profile's option chain offers calls and puts at set strikes around the current price.
Open the full entry →An option's premium is the price paid to buy it. It is made of intrinsic value (what it would pay if exercised now) plus time value (the chance it becomes worth more before expiry).
🎮 The premium is the price shown for each contract, per share, on a profile's options panel. It comes from Black-Scholes and rises as more players buy the same contract.
Open the full entry →An option's expiration date is the last day it can be used. After it, the option either pays out its intrinsic value or expires worthless.
🎮 Game options expire on Fridays: two weekly expiries and one monthly, settled against the 24-hour average share price.
Open the full entry →1950s–1990s
Risk gets measured, options get a formula, and index funds and ETFs bring the whole market to everyone.
The Chicago Board Options Exchange opened on 26 April 1973 with standard call options on 16 stocks. The same year, Fischer Black and Myron Scholes published their pricing formula, with Robert Merton extending it.
Traders could now calculate a fair price from volatility and turn a market price back into the volatility it implied.
💡 Why it made sense then
Standard contracts on an exchange made options easy to trade, and a formula made them possible to price.
Ideas it gave us
The Black-Scholes model is a formula for the fair price of a European option using five inputs: the stock price, strike, time to expiry, risk-free interest rate and volatility.
🎮 Journey Shares prices its options with Black-Scholes, using each person's own measured volatility.
Open the full entry →Implied volatility is the size of future price swings that an option's market price implies. High implied volatility means options are expensive because traders expect big moves.
🎮 The game prices options from each person's measured volatility, and prices rise as more players buy the same contract, much like demand raising implied volatility.
Open the full entry →An option is in the money when exercising it now would pay something: a call whose strike is below the stock price, or a put whose strike is above it. At the money means the strike equals the price.
🎮 At Friday's expiry, in-the-money options pay out automatically in play money; the rest expire worthless.
Open the full entry →An option is out of the money when exercising it now would pay nothing: a call with a strike above the stock price, or a put with a strike below it. Its whole premium is time value.
🎮 Out-of-the-money options in the game are the cheapest on the panel, and they expire worthless unless the price crosses the strike by Friday.
Open the full entry →A call option is a contract that gives its buyer the right, but not the obligation, to buy a stock at a set price (the strike) before or at a set date. Buyers profit when the stock rises above the strike by more than the premium paid.
🎮 Once enough shares have traded, each profile gets calls and puts at set strikes, expiring on Fridays, settled in play money.
Open the full entry →A put option is a contract that gives its buyer the right to sell a stock at a set price (the strike) before or at a set date. Buyers profit when the stock falls below the strike by more than the premium paid.
🎮 Puts on a person pay out if their share price ends below the strike at Friday's expiry.
Open the full entry →In 1982 US exchanges launched futures on stock indexes, first the Value Line index in Kansas City and then the S&P 500 in Chicago. Nobody could deliver a whole index, so contracts were settled in cash against an official settlement price. Index options followed in 1983.
💡 Why it made sense then
Paying the difference in money made it possible to trade on a whole market without handing over hundreds of different shares.
🎮 In Journey Shares
Game options settle in play money against a 24-hour average price, so one late trade can't decide the payout.
Ideas it gave us
A settlement price is the official price used to work out what a futures or options contract pays when it expires.
🎮 Game options settle in play money against the listing's 24-hour average price at expiry, so a single trade just before expiry can't decide the payout.
Open the full entry →🎮 Practise with $10,000 in play money
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
For learning only. This isn't financial advice.
