Volatility skew is the difference in implied volatility (IV) between out-of-the-money (OTM) options. A positive skew exists when the IV of OTM puts is higher than the IV of OTM calls, while a negative skew exists when the IV of OTM calls is higher than the IV of OTM puts. There are a few reasons … Read more
. Securitization: Making Money from Debt Who play a big role in asset securitization? There are many different players involved in asset securitization, but some of the most important are the originators, underwriters, and investors. The originators are the institutions that create the loans or other assets that will be securitized. They are typically banks … Read more
A married put, also known as a protective put, is an options strategy that involves buying both a put option and the underlying asset. The put option provides downside protection in case the asset price falls, while the underlying asset offers the potential for upside if the asset price rises. The key to this strategy … Read more
A lattice-based model is a mathematical model that tracks the prices of assets over time, using a lattice structure. This type of model is commonly used in options and derivatives trading, as it can help to predict how prices will move in the future. The lattice-based model is based on the assumptions that asset prices … Read more
Position limit definition refers to the maximum number of contracts of a particular derivative instrument that a person or entity can hold at any given time. This is typically set by exchanges in order to manage risk and ensure fair and orderly markets. Position limits may vary depending on the instrument in question, and may … Read more
. How the Iron Condor Options Strategy Works, With Examples What is the best iron condor strategy? There is no definitive answer to this question as the best iron condor strategy depends on a number of factors, including the investor’s objectives, risk tolerance, and market conditions. However, some general tips for constructing an iron condor … Read more
Bilateral Netting Definition: Bilateral netting is an agreement between two parties to net their financial obligations to each other. The netting of financial obligations means that the two parties agree to offset or cancel out any outstanding debts or credits that they may have with each other. This type of netting is often used to … Read more
Underlying security definition: A security that is traded on an exchange and used as the basis for a derivative security, such as an options or futures contract. The underlying security can be a stock, bond, commodity, currency, or index. What are futures and options? Futures are standardized contracts that are traded on an exchange. The … Read more
The settlement price is the price at which an options or futures contract is settled when it expires. The settlement price is used to determine whether the option or futures contract expires in the money or out of the money. What are the 5 settlement options? There are 5 main types of settlement options: 1. … Read more
A binomial tree is a model used to price options. The model assumes that the underlying asset price can either go up or down over a given period of time, and that each period has the same length of time. The model is used to price options by using a recursive algorithm. The algorithm starts … Read more
