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Cash An Option with No Expiration Date

Cash is one such option that has no expiration date. Many times holding cash is much preferred than investing it, as it has many benefits. Cash in hand serves to provide the investor with flexibility to purchase different assets or buy assets by bargaining whenever there is an opportunity. It is with this respect that cash is considered to be a call option which has no expiration date. However it is worth noticing that cash can be referred to as money market funds, treasury bills together with other liquid instruments.

Benefits of Cash

Holding cash is not a bad thing but the only thing which should be considered is that holding too much of cash might prove to be bad. This is like losing a guaranteed strategy. It is said that cash in terms of crises is priceless. To benefits from cash, an investor must have two basic prerequisites – an innate sense of market timing and access to ample amount of cash. The savvy investor that possesses these two can generate sufficient of wealth by investing in short term stocks. These investors are possible to be an exception instead of a norm, as not all people have the privilege to access sufficient amount of cash when needed, and the market timing is also not easy for putting into practice.

Holding cash has an opportunity cost attached to it and this is equal to the difference which one would get in return between the better performing assets and the minimum return on the cash. In actual cash cannot be considered as an ideal long term asset, particularly at times when the rate of interest is being recorded very low. However there are many times periods of risk and uncertainly when cash is considered to be the king and during such times, having access to ready cash in hand enables the investors to scoop up the bargains at extremely low valuations.

Under certain conditions, henceforth the investors must view cash as an option that has no expiration date or it can considered as a perpetual call option on any category of assets rather than considering it as an idle investment.

Cash in hand serves many benefits, as it can be used immediately without an individual having to wait for long time period, as is in the case of long term investments. Cash in hand assures liquidity, thereby meeting the needs of the individuals as they arise. Hence forth, it is proved, that cash is such a call option that has no expiration date.

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