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Found 240 results

  1. 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.
  2. 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.
  3. Are there any brokerages allow you to trade fx option?
  4. 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.
  5. Chooser Option refers to option contracts that can only be exercised on certain days. It offers flexibility to both the holder and writer.
  6. 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.
  7. A chameleon option gives investors the ability to meet varying investment expectations with a single contract instead of purchasing multiple contracts.
  8. 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.
  9. 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.
  10. Some options are usually not listed on an exchange, and that is why the listed options serve to distinguish listed assets from unlisted ones.
  11. 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.
  12. 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.
  13. This is one of the measures of implied volatility and price influences on options positions known as the "Greeks".
  14. 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.
  15. 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.
  16. Kappa is yet another of the measures of implied volatility known as the Greeks.
  17. "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.
  18. 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.
  19. This type of options can be used in periodic payment situations or balloon payment situations.
  20. 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.
  21. 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.
  22. 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.
  23. 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.
  24. This is a low-risk strategy which aims for getting small returns on the trade on expiry. It is a complicated strategy that is best suited for advanced traders.
  25. Bond options can be traded using calls and puts, and can be traded just as stocks are traded on the options market.
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