Options

by Abhishek

I am reading Personal MBA by Josh Kaufman to improve my business skills (hopefully!).

I am liking the book so far because for the first time in my life I understood what is the “Option”! Well at least conceptually.

The simplest example for understanding option is a “Movie Ticket”.

Yes, “Movie ticket is an option!”

So when you buy a movie ticket, you reserve your place in the cinema hall. Now no one else can buy that place now. But that does not mean you have to go watch a movie. If some better opportunity comes up such as having dinner with Warren Buffett, you still have an “option” to skip the movie!

I still have to relate this simple example to the real one in the world of finance but I guess I will make it this time.

Read more about option here:

http://book.personalmba.com/option/