Gamma hedging is an options trading strategy that seeks to reduce the risk associated with changes in the price of the underlying asset. The goal is to offset the potential for loss that would result if the underlying asset’s price moves in a direction that is unfavorable to the position. The key to gamma hedging … Read more
A multi-leg options order is an options trading order that involves the simultaneous purchase or sale of two or more options contracts. Multi-leg options orders can be used to trade a variety of different options strategies, including straddles, strangles, butterflies, and condors. Multi-leg options orders can be placed online or over the phone with a … Read more
Delta-gamma hedging is an options hedging strategy that involves buying and selling underlying assets in order to offset the effects of changes in the value of the underlying asset on the value of the option. The delta of an option is a measure of how much the value of the option changes in relation to … Read more
A bear spread is an options trading strategy designed to profit from a decline in the price of the underlying asset. The strategy involves the purchase of one option and the sale of another option with a higher strike price. The options can be either calls or puts. If the options are call options, the … Read more
A condor spread is an options trading strategy that involves buying and selling four option contracts with different strike prices, but with the same expiration date. The strike prices of the options contracts are typically evenly spaced, and the spread is usually constructed with two options contracts bought and two sold. The condor spread is … Read more
An Asset Swapped Convertible Option Transaction (ASCOT) is an options trading strategy that involves the simultaneous purchase of a convertible bond and the sale of a call option on the same underlying asset. The strategy is designed to provide downside protection while still allowing for upside potential. The key to this strategy is the use … Read more
Conversion arbitrage is a type of trading strategy that involves the simultaneous purchase and sale of two different options contracts with different strike prices, but with the same expiration date. The trader is looking to profit from the difference in the price of the two options contracts. For example, let’s say a trader buys a … Read more
A compound option is an options strategy that involves buying and selling two options at the same time. The options can be either puts or calls, and they can be either bought or sold. The options can be on the same underlying security, or on different underlying securities. Compound options are often used to hedge … Read more
Vega is a measure of the sensitivity of an option’s price to changes in the volatility of the underlying asset. It is a key measure of an option trader’s risk. The vega definition is the change in the option price with respect to a 1% change in the underlying asset’s volatility. Vega is always positive … Read more
A diagonal spread is an options trading strategy involving the simultaneous purchase and sale of options with different strike prices, but with the same expiration date. The options bought are typically out-of-the-money (OTM), while the options sold are at-the-money (ATM) or in-the-money (ITM). The purpose of a diagonal spread is to profit from a change … Read more
