# Questions tagged [options]

A contract that gives the owner the right, but not the obligation, to buy or sell a security at a fixed price in the future.

1,206 questions
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### Higher Vega with ATM options when Spot is higher

Which would have larger vega, an ATM call option at spot 100 or an ATM call option at spot 200. Apparently the answer is the one with ATM at spot 200. I am not sure how you get this answer. Why ...
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### Problems with local volatility models (vs stochastic volatility models)

Why is pricing with local volatility models are problem with exotics, mainly due to "the volatility surface is the market's current view of volatility and this will change in the future meaning the ...
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### Value of Call Option as Volatility goes to Infinity

Why would the value of a call option go infinity as volatility goes to infinity? I understand how you could solve this question by taking $\sigma \rightarrow \infty$ in the solution to the black ...
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### Different versions of Put-Call Parity

Why is it stated sometimes that $C - P = F$ and in wikipedia it statest that $C - P = D(F-K)$, where D is the discount factor and K is the strike (of both the call and put?). Is this just affected ...
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### Why is the holder of a basket call long correlation?

I'm told that the holder of a basket call is long correlation. I understand that an increase in correlation leads to an variance of a portfolio. But with one "degree of freedom" (high positive ...
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### Cashless Exercise of Warrants

This is the formula for a Cashless Exercise of Warrants: X(A-B)/A = Y Where: Y = the number of shares received X = the number of shares purchasable A = price of the stock B = exercise price ...
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### QuantLib in Python, are there any existing methods to handle the options delta on expiration day?

Tried [ql.Settings.instance().includeReferenceDateEvents = True] and it works for the calculation of NPV using intrinsic value of the option. But Delta is nan for an in-the-money option. I understand ...
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### Option pricing with negative strikes

I am valuing corporate securities with call option pricing models. In this scenario, it seems possible to have negative strike prices if we assume that some assets or revenues do not have a diffusion ...
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### What is the vega profile of an up-and-out call option? And why is this important in structuring?

I had this question during an interview but I can't seem to find the answer on the internet.
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### varswap replication doubt

I have a doubt regarding the varswap replication- I know the portfolio of options with proper weights is a static one, and that there is a dynamic position required in underlying. My confusion is ...
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### Black-76 Model for Swaption Price and Greeks

I'm in the early stages of developing a swaption pricing model. Suppose $t_1$ is the tenor of the swap rate in years, $F$ is the forward rate of the underlying swap, $X$ is the strke rate of the ...
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### Stop loss strategy using options

I normally trade stocks using Robinhood, and use a simple stop loss strategy for 2:1 P/L trades. I recently got invited to use their options via their phone app, and was interested in trading some ...
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### Why is there a difference in American option prices when comparing pricing methods (Python)?

I have written a Python script to price American options using Least Squares Monte Carlo and added a QuantLib implementation below (analytical/binomial/finite difference) to compare. The problem is ...