options, page-2

Options are derivative contracts. There are two kinds of options, calls and puts.

In the case of ERJ, the call option is the relevant contract.

A call option gives the owner a right to buy the underlying asset (ERJ stock) at a specified exercise price ($0.20) on or before a specified expiration date (31 December 2016).

Put simply ERJ will give you a financial asset (like a share) which gives you the right to buy ERJs shares at $0.20 any time before the expiration date. So say if the stock is $1 next december, the option gives you the right to buy the stock at $0.20 of the company and then you can then sell that stock on the market making a risk free gain of $0.80.

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