Term
American Exercise Type
(Options) |
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Definition
| The holder can exercise anytime BEFORE or on the actual expiration date |
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Term
European Exercise Type
(Options) |
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Definition
| The holder can exercise the option ONLY at expiration |
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Term
Bermudan Exercise Type
(Options) |
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Definition
| The holder can exercise on specified dates or during specified periods |
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Term
Intrinsic Value (Distinguish between Call and Put)
(Options) |
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Definition
Difference between the strike price and underlying value
Call - (Underlying[spot]-Call Strike)
Put - (Put Strike-Underlying[spot])
** Cannot be negative ** |
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Term
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Definition
| Strike = Underlying Price |
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Term
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Definition
CALLS - Underlying Price > Strike Price
PUTS - Underlying Price < Strike Price |
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Term
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Definition
CALLS - Underlying Price < Strike Price
PUTS - Underlying Price > Strike Price |
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Term
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Definition
Measure of the variation of the price of a stock over time (standard deviation)
-The speed of the market (Bell Curve) |
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Term
Historical Volatility
(Options) |
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Definition
HVT<Go>
Good place to start it is calculated using already observed stock prices, but the main drawback is that history does not always repeat itself. Derived from Standard Deviation.
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Term
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Definition
| The right to BUY the underlying security on or before a specified date. |
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Term
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Definition
| The right to SELL the underlying security on or before a specified date |
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Term
Implied Volatility
(Options) |
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Definition
The volatility "implied" from the options market looking forward. It represents the markets forecast of how volatile the underlying price will be over the remaining life of the option.
*Calculated on calendar days |
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Term
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Definition
| Comparing implied volatility on the Y-axis to different tenors or maturity points on the X-axis |
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Term
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Definition
| Comparing immplied volatility on the Y-Axis to different strikes or % moneyness on the X-Axis |
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Term
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Definition
A model used to valuate an option with 5 factors
- Underlying price of the security
- Risk-Free Rate
- Expiration Date
- Strike Price
- Volatility
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Term
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Definition
| Buying a call and a put, both wiith the same price and expiration date (typically at the money price) |
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Term
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Definition
| Buying a call and a put at two different strike prices, similar to straddle but less expensive |
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