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Found 240 results

  1. The ability to exercise the options at different times as opposed to only at expiry gives the option buyers and sellers flexibility to trade the options and exercise them to their benefit. The degree of flexibility is less than for American options but more than what is obtainable with European options. Being in between America and Europe gives it the name "mid-atlantic".
  2. The master swap agreement is used to take care of the legal aspects of a swap deal between two parties, and provides a benchmark for future negotiations on the swap deal.
  3. By establishing a floor, the married put confers unlimited profit potential and limited loss potential on the trade. It is a hedge trade used to protect against massive drops in the price of the underlying asset.
  4. "This is an exotic option. The payoff depends on the maximum or minimum underlying asset's price occurring through the option's duration. The option holder can ""look back"" as it were to determine the payoff. The option can be of the fixed or floating type. "
  5. 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.
  6. 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.
  7. 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.
  8. 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.
  9. Some options are usually not listed on an exchange, and that is why the listed options serve to distinguish listed assets from unlisted ones.
  10. 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.
  11. 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.
  12. 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.
  13. This model is most suitable for the pricing of employee stock options.
  14. An example of a lapse is the termination of an insurance contract due to failure to pay premiums by the insured party. For an options trade, the contract lapses when the asset reaches maturity, at which time the holder of that option can no longer hold the right to buy or sell the asset.
  15. This is one of the measures of implied volatility and price influences on options positions known as the "Greeks".
  16. In the ladder option, the full payout is not hinged on one outcome or one strike price. Rather, the payout is broken up and attached to several strike prices, such that the attainment of a strike delivers some degree of payout. This ensures that the trader is guaranteed some measure of profit if even one of the pre-set strike prices is achieved.
  17. This option is programmed to expire worthless when a particular price level is reached, usually in favour of the trader. There are options which will be of benefit to a trader if they expire worthless (for instance if a premium was collected on trade execution). Knock-out options have a limited profit potential.
  18. A knock-in option stays latent until when the price has exceeded or reached a pre-determined price level. Then the option now begins to function as a true option. If that price is never reached, then the knock-in option is never activated.
  19. Kappa is yet another of the measures of implied volatility known as the Greeks.
  20. "The iron condor is an option type with limited profit or loss potential. This strategy is mainly used when a trader has a neutral outlook on the movement of the underlying security i.e. the trader expects the asset to stay range-bound for the duration of the trade. "
  21. The two options located at the middle strike create a long or short straddle depending on whether the options is being bought or written. The "wings" of the butterfly (the options above and below the middle strike) are created by the purchase or sale of a strangle. This strategy is used to protect the trader's position against dramatic rises and falls in price.
  22. The interest rate option is an options contract in which a fixed rate of interest is paid at a specified price and future date. They are also called debt options or fixed income options.
  23. This type of options can be used in periodic payment situations or balloon payment situations.
  24. In an inflation swap, there are two parties to the deal. One party transfers the inflation risk, and the other party assumes the inflation risk. One party's assets are linked to a price index and the other party's assets linked to cash flow (which could be fixed or floating).
  25. Traders who do not find it comfortable trading stocks in the options market can decide to trade the performance of a group of options measured by an index. These options are known as index options.
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