Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.
-
Welcome Guests
Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.
Search the Community
Showing results for tags 'option'.
Found 240 results
-
Some options pay the option writer a premium on writing the option. This is why some traders prefer to become option writers or grantors.
-
The Black's Model was developed by one of the originators of the Black-Scholes Model, and was created as a variation of the Black-Scholes model to be able to allot a value to futures contracts.
-
Gamma is used as a measure of the inherent volatility of an asset. A very volatile option contract implies a large gamma. A small gamma therefore implies an asset with low inherent volatility.
-
The Black's Model was developed by one of the originators of the Black-Scholes Model, and was created as a variation of the Black-Scholes model to be able to allot a value to futures contracts.
-
The Black-Scholes option pricing model is an example of a gamma pricing model which is usually applied to a stock option to determine its value, using the price variation of the stock, the time value of money, the strike price and expiry time of the option and the time value.
-
Binary options are also called fixed return options because the payout is fixed, and also called "all or none" options because the trader either receives all the money being paid out for a correct trade, or none of the money paid out if the chosen result is wrong.
-
The buyer of the Bermuda swaption
-
Bermuda options are used in both American and European options. They are cheaper to trade than American options for options buyers because the premiums are lower, while they are more flexible than European options for options sellers.
-
The aim of the bear straddle is to profit from a very small price decline of the asset and so collect the premiums on both the short call and short put components of the trade. This trade type is risky as large moves (even to the downside) will cause losses that offset any premiums collected, leading to a losing position.
-
This option type will turn a profit when the price of the asset declines. It is usually used in agricultural commodities trading to trade two similar assets, or even the same asset on the two legs.
-
The aim of the trade is to benefit from a decline in the price of the asset below the strike price of the short put leg of the option trade. The trader can then profit from the difference in the strike prices multiplied by the number of shares traded in the deal.
-
The aim of the bear call spread is to benefit from a fall in the price of the asset below the price at which the call options were sold. The premium on the long call minus the premium on the short call is now collected as profit, which is multiplied by the number of shares traded for the final payout.
-
The basket option allows the trader to trade several assets at the same time and under the same conditions. An application of a basket option is when a corporation wants to get exposure to several currencies in a cost-effective manner (i.e. using one option to trade several currencies). The strike price is derived from the weighting of the individual assets in the basket.
-
In the binary options market, the equivalent of the barrier option is the Touch/No Touch contract. There are two types of barrier options. The knock-in barrier option (Touch) gives a payout if the price touches the barrier price before expiry. The knock-out option (No Touch) gives a payout if the price of the asset does not touch the barrier before trade expiry.
-
What happens with a balloon option is that instead of getting a payout of a dollar for dollar amount for every price increase of the asset, the payout increases for every dollar price increase of the asset in a pre-determined ratio. So if a balloon option is traded with a pre-set threshold of $60 and the price increases by say $2 to $62, then the payout may be $1.5 for every extra $1 gain.
-
The backspread can be executed using call or put options, and has unlimited profit potential while the loss potential is limited. An example of a backspread option is the ratio backspread option.
-
Compound options usually have a call and put component, with one option being exercised for the purchase of the other. The back fee is the premium that is charged on the second round of the option.
-
The extrinsic value of an asset declines as its date of expiration draws closer. It is the value of an asset that is assigned to it by external determinants.
-
A company in the US may decide to pay 20,000 euros monthly to a company in Europe for raw materials at an agreed exchange rate. If at the end of the time interval for the option, the average of the monthly payments is less favourable than the strike price of the option trade, then the US company will receive a payment for the differential from the option issuer.If the average rate is found to be less desirable than the strike price, the hedging party receives the payment of the differential from the option issuer. No payments are made if the average rates are more favourable.
-
This is used as a hedging strategy. As an example, if a trader purchased an average price put contract of 1,000 barrels of crude when the product is $70 with a view to benefit from falling prices, and the price on expiration is $63, then the average price put payout will be ($70 - $63) X 1,000 barrels = $7,000 (less commissions payable on the trade. If the price on expiration was say $73, then the payout for the trade is zero.
-
The Atlantic ocean divides America from Europe, hence the name of the option. The aim of this option type is to be able to close out an option before expiry if it becomes profitable, so as to prevent time decay on the asset and also to be able to monetize an option faster, using the American leg of the option.
-
This is also known as an average value option, and it is useful when the trader wants to protect his trade from the effects of undue price volatility, and also to reduce cost (as they are cheaper than American or European options).
-
The coupon payout of the annapurna option is not guaranteed, but depends on whether the worst performing asset in the options basket falls below the benchmark rate of return or not, as well as the extent of any such falls in price. If it takes longer for the worst performer to hit the price floor, the coupon payout is higher. If it takes lesser time to do this, the coupon payment is lower.
-
It is one of the three regular option cycles that is used determine the expiration date of an option contract.
-
Mini-sized Dow options provide an easier entry into the options market for investors that do not have as much money to trade the full-sized Dow option.
