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Market Wizard
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About Igor

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  1. In a cliquet option with a strike price of $1,200, if the option expires at $1,000, the trade will end out of the money. The cliquet option wil then ratchet the next strike price to automatically rest at the expiry price in the previous trade, which is $1000. If the trade then ends at $1,100, the trader gets a payout and the strike price is then reset to the trade expiry of $1,100 for the next trade.
  2. It is a variation of the ratio spread and is used when the trader believes the asset will make a mild bullish move, and the staggered nature of the short call strike prices prevents the trader from incurring a very large loss if the asset makes a remarkable move to the upside.
  3. Chooser Option refers to option contracts that can only be exercised on certain days. It offers flexibility to both the holder and writer.
  4. The CBOE was opened in 1973 and is located in Chicago. Presently more than one billion options contracts are traded on the CBOE annually.
  5. Due to the fact that the Delta is an estimate of the intrinsic value of an option, the Charm is especially useful for measuring the decay of an option when it is close to expiration, since the chance of an option that is out of the money expiring in the money drastically decreases as the option draws closer to expiry.
  6. A chameleon option gives investors the ability to meet varying investment expectations with a single contract instead of purchasing multiple contracts.
  7. By straddling the asset's market price, the long straddle is an option trade type that is used to benefit from up or down movements of the asset. So whether the asset price rises or falls, the long straddle is a winner. Used when the trader is sure that the asset will move in a direction, but is unsure of which direction.
  8. In trades were traders either receive or pay premiums on trades, it is necessary to know which of the trades initiated involves long trades. These are the long legs of the trades.
  9. The long jelly roll is an options trade that aims to profit from a time value spread through the sale and purchase of two call and two put options, each with different expiration dates.
  10. Lock-up options are usually priced in such a way as to deter unwanted buyers and attract only the buyers that the option owners want to sell to.
  11. Some options are usually not listed on an exchange, and that is why the listed options serve to distinguish listed assets from unlisted ones.
  12. When the interest rates payable are those of the day on which they are to be paid, it would potentially benefit investors who want to pay lower interest rates. In this case, if interest rates are falling, then the LIBOR in-arrears swap would be favourable to such investors.
  13. In trading, a trader can potentially increase the size of leveraged positions in order to benefit maximally from trade opportunities that present themselves. However, leverage build-up is a double-edged sword which can be potentially damaging if the trades that present extra leverage do not go in the trader's direction.
  14. A leg is used to describe a component of an option trade where that option trade requires more than one setup. An example of an option trade with legs is a straddle. A straddle has two trade components or legs, one above and the second below the market price.
  15. This model is most suitable for the pricing of employee stock options.
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