What are real options What are the types of real options

Speaking of options investment, everyone should be familiar with stock options and various futures options. So what do real options mean? What are the common types of real options? Let's take a look with Xiaobian.

What are real options

Real options are also called index options and stock options. The underlying securities are physical commodities that are neither stocks nor futures. These physical commodities are the constituent elements of the option and are available to managers when making decisions about the physical assets they own Flexible investment strategy. When the market environment facing the company is uncertain, the value of real options is the adjustment of the company's strategic decisions. The company determines its real options based on different investment portfolios, and manages and operates to create value. Real options are based on the theory of financial options, giving dynamic quantitative value, and ultimately transforming uncertainty into corporate advantage.

Types of real options

1. Expansion options. It has large fluctuations in real estate prices, and developers will invest a small amount of money in immature markets with unclear product structures to test the market;

2. Conversion options. During the project implementation process, high-capacity developers can transform input factors according to changes in the external environment, providing mobility for enterprise project operations, and also providing enterprises with tools to adapt to market changes;

3. Contraction options. Both it and suspension options mean that the developer has the right to reduce the original investment in the face of a lower-than-expected market environment, with the purpose of reducing losses.

4. Enterprise growth options. It means that when a developer accepts a project, he may not only consider the financial benefits of the project itself, but also consider the impact of the project on the future development of the enterprise, and more importantly, consider the strategic value of employee accumulation and corporate brand support. .

I believe that the meaning of real options should be clearer through the above introduction by the editor. If the above is helpful to you, don't forget to follow the Followme community to learn more about investment and financial management.