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+296 •   N o t e s
+2. One more bit of essential but confusing jargon when investing in 
+options is related to exercise. There are actually two styles of exercise; 
+one can be exercised at any time before expiration—these are termed 
+American style—and the other can only be exercised at expiration—
+termed European style. Confusingly, these styles have nothing to do 
+about the home country of a given stock or even on what exchange 
+they are traded. American-style exercise is normal for all single-stock 
+options, whereas European-style exercise is normal for index futures. 
+Because this book deals almost solely with single-stock options (i.e., 
+options on IBM or GOOG, etc.), I will not make a big deal out of this 
+distinction. There is one case related to dividend-paying stocks where 
+American-style exercise is beneficial. This is discussed in Appendix C. 
+Most times, exercise style is not a terribly important thing.
+3. Just like going to Atlantic City, even though the nominal odds for rou-
+lette are 50:50, you end up losing money in the long run because you 
+have to pay—the house at Atlantic City or the broker on Wall Street—
+just to play the game.
+Chapter 3
+1. We adjusted and annualized the prices of actual option contracts so 
+that they would correspond to the probability levels we mentioned 
+earlier. It would be almost impossible to find a stock trading at exactly 
+$50 and with the option market predicting exactly the range of future 
+price that we have shown in the diagrams. This table is provided simply 
+to give you an idea of what one might pay for call options of different 
+moneyness in the open market.
+2. Eighty-four percent because the bottom line marks the price at which 
+there is only a 16 percent chance that the stock will go any lower. If 
+there is a 16 percent chance that the stock will be lower than $40 in 
+one year’s time, this must mean that there is an 84 percent chance 
+that the stock will be higher than $40 in one year’s time. We write 
+“a little better than 84 percent chance” because you’ll notice that the 
+stock price corresponding to the bottom line of the cone is around 
+$42—a little higher than the strike price. The $40 mark might corre-
+spond to a chance of, let’s say, 13 percent that the stock will be lower;