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Found 166 results

  1. 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.
  2. 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.
  3. 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.
  4. Some options are usually not listed on an exchange, and that is why the listed options serve to distinguish listed assets from unlisted ones.
  5. 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.
  6. This model is most suitable for the pricing of employee stock options.
  7. 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.
  8. This is one of the measures of implied volatility and price influences on options positions known as the "Greeks".
  9. 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.
  10. 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.
  11. 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.
  12. Kappa is yet another of the measures of implied volatility known as the Greeks.
  13. "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.
  14. Every so often a new product comes out that opens a new door to opportunity. Since the 80s when computers began their takeover of the trading industry a variety of new products have been created for traders to speculate, hedge, and insure against risk. Electronic index futures such as the E-mini’s (ES, YM, NQ, and TF) allow us to take advantage of price fluctuations tick by tick in the broader indices. ETFs have changed the way we group baskets of stocks together, allowing us to trade a variety of companies within one instrument. I've been trading the weekly options of ES futures and here are some of my findings... Options enhanced our ability to mitigate risk, by limiting downside and (in certain cases) allowing for unlimited upside potential. One of the drawbacks to long options trading has always been theta, or time decay. An Alternative to Futures Just like futures, options expire. The difference, as your option contract get closer and closer to expiration the value can begin to decrease dramatically (this can either work in your favor if you’re on the short side, writer of the option or against you if you’re a buyer of an option). That brings us to options on futures, more specifically weekly options on futures. At first glance you might think that weekly options would be extremely risky due to their short expiration, but let’s consider them for another purpose, day trading and short term swing trading using the ES weekly options. Weekly Options on Futures Weekly options on futures provide a nice alternative to straight up day trading futures, let’s have a look: What are the benefits? - No futures account needed - Limited risk (when buying weekly options) - Pattern day trade rule does not apply* * The pattern day trade rule states that if your account is less than $25,000 you may only make 3 day trades in a 5 day period. Futures accounts are exempt from this rule, along with weekly options on futures. Another positive to trading weekly options is that (thanks to the option Greek: Delta) going long options increase in value quicker as they move in your favor, and decrease in value slower as they move against you. ES Options on Futures - Theta What are the negatives? - Short time to expiration - Harder to set limit orders in anticipation of entry or target Because of the option pricing structure, if you purchased a weekly ES call option on Monday and price moves in your favor, but you hang on until Friday the option has the potential for expiring worthless. In other words, not only do you need to be correct on the direction of the move, the move also needs to occur within a rather quick window of time. For this reason weekly ES options make for a great day trading opportunity. In Summary The ES weekly options provide a low risk way to day trade the 15-min and daily levels. For traders without a futures account or hesitant about trading futures, these can be a great way to control risk, while still taking advantage of the short term price swings in the ES.
  15. 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.
  16. 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.
  17. 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.
  18. 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.
  19. 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.
  20. 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.
  21. Hi all, I'm new to this forum and website, was hoping someone could help me / point me in the right direction. I am really keen on building a binary options based trading platform and am looking for an open source binary trading platform (no matter how basic) on an open source license that I could get access to. If anyone can help, that would be fantastic! Cheers all Sacho.
  22. Bond options can be traded using calls and puts, and can be traded just as stocks are traded on the options market.
  23. Some options pay the option writer a premium on writing the option. This is why some traders prefer to become option writers or grantors.
  24. 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.
  25. 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.
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