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
-
It compels the responsible counterparty to reimburse the non-responsible counterparty for all losses and damages that were brought about by the premature termination of the swap.
-
Illiquid options are difficult to sell because they are far away from their expiration dates and as such when they are sold, they are sold at a huge discount.
-
Also called a calendar spread, this option strategy hopes to take advantage of different moves of the asset at various times. For instance, an asset may be bearish at a certain time, and then bullish thereafter. By using a calendar spread, the trader can benefit from the different conditions for the asset as a result of the different expiry times set for the two sets of options trades.
-
Horizontal skews can either be forward skews when volatility increases from near to far months or, reverse skews when volatility decreases from near to far months.
-
Options trades are commonly used as hedging transactions to protect trades in the parent markets of the assets traded. Typically, the trade used as a hedge goes in an opposite direction so that a loss in the parent market on that asset will translate into a profit on the trade used as the hedge, cutting down any losses sustained.
-
Investors who enter into this type of position, have the expectation that the option will expire worthless and thereby receive a large up front premium.
-
The Greeks which include gamma, vega, delta, rho, and theta, are often used for dynamic hedging. Of all these, only Vega does not have a Greek alphabet assigned to it.
-
Some options pay the option writer a premium on writing the option. This is why some traders prefer to become option writers or grantors.
-
While a globally floored contract helps the investor recover some of his initial investment in the options contract, activating the use of a globally floored function will prevent the trader from receiving the maximum payout if the trade ends up a winner.
-
The Black-Scholes option pricing model is an example of a gamma pricing model.
-
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.
-
Bid and ask spreads on contracts of this kind tend to be rather wide because of the illiquidity of such contracts.
-
"These are assets that are easily exchangeable and tradable. Commodities, common shares of the same company, and currencies are all examples of fungibles. "
-
Created by Professor Mark Garman in 1989, it represents the optimal date with which to exercise an American option.
-
Also known as ratio vertical spread, the frontspread is used by professional traders when they believe that the asset will make a calculated upward move. It is a risky strategy because loss potential is unlimited but profit potential is limited.
-
In simple language, the front fee is the cost of acquiring a compound option. Usually a second front fee is made when the option is eventually exercised.
-
Even though the option is an advance trade, the premium for the trade is usually paid in advance. In addition, the expiration time is usually set at the time the forward start option is purchased.
-
The formula method is used to calculate what compensation will be paid to the party that was not responsible for the early termination of the swap contract. Used in calculating compensation to one party in a currency swap deal.
-
Option cycles are commonly used to determine the expiration dates of options contracts, and the FMAN months represent one of the cycles used in doing this.
-
Created in 1993 by the Chicago Board Options Exchange (CBOE), FLEX options provide investors with the opportunity to trade expanded position limits.
-
"When a trader purchases an optionb with a fixed expiry, the present value of the strike price is invested in an interest yielding account with very low risk. On maturity, this investment can then offset the costs of exercising the initial option if the holder decides to do so. "
-
Both the call and put options in a fence option have the same expiration with the call option forming the ceiling and the put option forming the floor of the trade, hence the name "fence" option because both call and put options fence the trade in.
-
Far options attract larger premiums because they have longer expiry times, which gives them more time to expire in the money.
-
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.
-
Expiration times give an indication as to the time of the day that the option must be exercised when the due date has arrived.