European put option payoff
If you understand this, then you can understand all derivative pricing! Quitting your job does not trigger a taxable event for your k funds unless you elect to cash out your account and take Thus, investing in the option is similar to investing in the underlying asset, except the option holder will have the benefits of lower capital outlay, limited risk, leverage and greater profit potential. I think the most enlightening way to look at this problem is from a no-arbitrage point of view. A European call option gives the owner the right to purchase the underlying security, while a European put option gives the owner the right to sell the underlying security. Therefore, they are closed for trading the Thursday prior to the third Saturday of every month.