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Igor
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Everything posted by Igor
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Weather conditions such as hurricanes and drought can radically affect the supply of agricultural and energy commodities. These assets are therefore suitable candidates for employing weather derivative protection.
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A positive vomma is a signal to go long on an option, while a negative vomma is a signal to go short on an option.
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Volatility smiles are used mainly in the currency and equity options markets.
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A volatility skew is seen when there are more call-write than put-write orders in the equity markets.
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Volatility quote trading is another option asset that is used to trade market volatility. It is used by advanced traders.
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This is a trade strategy in which the trader holds a position in an option and a contrary directional position in the asset itself. It is a delta-neutral strategy which can be used to balance out response of the asset to market movements when implied volatility declines.
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This is an asset which can be traded in the options market using various trade types. A trader trading the VIX option is trading market volatility.
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Apart from being used to gauge the volatility of an option or other asset in the financial markets, the VIX can be traded as an asset on its own.
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A vest fleece allows employees to have an increased ownership stake in their company of employment.
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Straddles, iron condors and strangles are examples of vertical spread trades in the options market.
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It is one of the ‘options Greeks’ together with delta, gamma, rho and theta. The essence of a vega neutral strategy is to neutralize the effect of volatility on an options position.
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Vega is one of the Greek option paramters which are used to evaluate the risk profile of an options contract. Vega is a measure of the sensitivity an asset is to volatility. Large volatility = higher vega, low volatility = lower vega values.
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The goal of a variable ratio write is to make money by collecting premiums on all the short call option trades that are setup. Best used for low volatility assets.
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A vanilla option simply refers to some of the uncomplicated (straightforward) ways of executing options trades. Naked calls and puts are examples of vanilla options.
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his is used as a less expensive method of hedging a short option position, usually by large market players such as hedge funds and other institutional investors.
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This is used as a less expensive method of hedging a long option position, usually by large market players such as hedge funds and other institutional investors.
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An underwater option has a high chance of expiring worthless.
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The underlying option security is the asset that is traded by the trader in the financial markets. Such an asset has value, and it is the perceived value as traded in the markets that produce the change in the price of the option security which create money opportunities in the market.
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Writing uncovered contracts can put a writer at significant risks unless the buyer is unable to exercise the option because it is out of the money.
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This is another of the Greek option terms which is used in conjunction with the vomma and vega to make trading decisions in the options market based on volatility.
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This event usually takes place during the last hour of trading on the third Friday of March, June, September and December. It is a short term event and as such, has little or no effect on long term investors.
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It is used as an investment prediction tool, and incorporates the possibility of an asset not changing price during the duration of the option as one of the possible values (in addition to increase or decrease in price.
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The essence of the Trade or Fade rule is to prevent trades being executed at prices that are not optimal when there are better offers available elsewhere.
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The time value of an option is higher when the expiration is still at a distant date. As the expiration draws closer, the time value of the asset erodes. If traders want to gain from an asset by exercising it, it should be done in the first half of the asset's lifespan so as much time value is retained on the asset.
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Time decay occurs because the demand for the asset drops off when the option is about to expire. It is a factor that traders must consider when making a choice of whether to exercise the option or not.
