"In 2020, companies with real options had a valuation boost for their current operations because of a fall in the cost of capital and a gain in their real options because of an increase in volatility." Michael Mauboussin FT today.
See also: morganstanley.com/im/publication…
See also: morganstanley.com/im/publication…
2/ "A real option has the right—but not the obligation—to make a potentially value-accretive investment. Investment examples include new plants, line extensions, joint ventures, and licensing agreements." capatcolumbia.com/Articles/FoFin… 
3/ Risk isn't uncertainty.
"Uncertainty can be your friend because you can learn from experience and use the option not to make an investment. There’s no necessary association with loss
with uncertainty, whereas with risk there’s the concept of a potential downside.” Mauboussin
"Uncertainty can be your friend because you can learn from experience and use the option not to make an investment. There’s no necessary association with loss
with uncertainty, whereas with risk there’s the concept of a potential downside.” Mauboussin
4/ To understand real options, invert in the manner of Charlie Munger. What company is viewed as having no real options (ie, just risk)?
Clue: They pay for a lot of promoted tweets in an attempt to support their stock price and have a three letter ticker starting with I.
Clue: They pay for a lot of promoted tweets in an attempt to support their stock price and have a three letter ticker starting with I.
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