Mindblown: a blog about philosophy.
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FUNDAMENTAL CONCEPTS
OPTION: An option on an underlying asset is either the right to buy the asset (a call option) or the right to sell the asset (a put option) at some predetermined price and within some predetermined time in the future. Notice that the key feature here is that the owner has the right but not […]
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WHY OPTIONS?
Options limit risk a. An option gives the holder a risk-limiting position in the underlying. b. Because they limit risk, they provide symmetric payoffs that can be used to reshape the profit/loss profile of a position. Option premiums and volatility a. The single most important difference between an option and an underlying is that the […]
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Delta Neutrality
This just means that they have various positions on (some bullish and some bearish) but their overall portfolio is pretty delta neutral. It can be very difficult to trade directionally, so we often choose to keep our deltas neutral. This means that if there are big directional moves in the market, our portfolio will be […]
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Lambda
In options trading, lambda is the Greek letter assigned to a variable that tells the ratio of how much leverage an option is providing as the price of that option changes. This measure is also referred to as the leverage factor, or in some countries, effective gearing.
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Ultima
Ultima is the rate at which the vomma of an option reacts to volatility in the underlying asset. It is a third order derivative of the option value with respect to volatility. Ultima is a derivative of vomma, which is a derivative of vega. Ultima is part of the group of measures known as the […]
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INTRODUCTION TO OPTIONS- LESSON 1
INTRODUCTION TO OPTIONS LESSON 1 Options are derivative instruments. The word derivative simply means that the value of the instrument and its characteristics are contingent upon the This and the volatility of that underlying asset that the option is written on. underlying security are what give options value. The great advantage of options is their […]
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Option Implied Volatility: Understanding and Utilizing
Option implied volatility is a critical concept to understand when it comes to trading options. By understanding how it works, traders can identify opportunities in the market, hedge their positions, and adjust their strategies accordingly. In this blog, we will discuss what option implied volatility is, how to assess and interpret it, and how to […]
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Constant Maturity and Historical Pricing, what is the difference?
Historical and constant maturity pricing are two distinct methods of pricing financial instruments. Historical pricing relies on past actual market data to calculate the value of a security or derivatives contract, while constant maturity pricing uses theoretical models to determine value. The primary difference between the two methods is that historical prices reflect actual market […]
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Big Boy (BB1)
BIG BOY SCENARIO ANALYZER You start off by selecting one of the green buttons (“build” will appear if you have none created) In this example we are using Apple and this is the first window that will pop up In the panel all the available expirations will appear , so this would represent the options […]
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FED’S POWELL: WE WILL NEED TO DO MORE RATE INCREASES, THEN LOOK AROUND AND SEE IF IT’S ENOUGH.
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