# 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.

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### Risk neutral valuation : Options on futures derivation

Recently I got a problem. It is derivation of Options on futures formula using Risk Neutral Valuation. First, Futures (Now 'F') have equation that 'F=Sexp^{(r-q)(T-t)} {S = Underlying Asset, q = Asset ...
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### Probability of an Option maturing In-the-money vs. Volatility

How will the probability of an option ending up in the money change if the volatility of the underlying stock increases? Intuitively, I think the answer to this is that if volatility goes up the ...
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### Can someone explain rigorously Taleb's criticism of Nate Silver's election forecasting?

Taleb makes the claim in this paper (and others) that there exists some sort of bound on the variance of a binary forecast such that if a forecaster's binary predictions exceed the bounds on variance ...
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### Newbie question on volatility surface building

I am trying to build a prototype equity volatility surface for pricing european call options, as a way of learning a new programming language that I am looking at. Is there anything wrong with the ...
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### Reproducing a short put position using known binomial option tree

Suppose a put option follows prices according the the binomial tree I've made and posted below and consider writing a put ($S$ is the stock value, $P$ is the put value, obviously). I want to find the ...
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### Payoff of barrier options

I was reading a research paper recently and the author defined payoffs of Up-and-Out and Down-and-Out barrier call options as max[0, ST - K]I(m < H) and max[0, ST - K]I(M > H) respectively. K is ...
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### How should I interpret this Put Option delta graph?

In the following graph there's an example of Delta for a Call Option and a Put Option. I understand what this greek means and I understand why it's positive for calls and negative for puts. What I don'...
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### Is this actual example of calendar arb in quotes?

From my understanding total implied variance has to be a monotonic function of time for there to be no calendar arbitrage. Stumbled upon quotes for this Monday with apparent arb (NKE Dec expiry vs Jan)...
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### Covariance of a simple option portfolio

Suppose that you have an option portfolio composed by two plain vanilla call options. Each option has, as underlying, a different share following a different Brownian stochastic process. The two ...
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### Can you use the SABR implied volatility in the Black Scholes formula?

The SABR implied volatility is often used as an input in Black's model to price swaptions, caps, and other interest rate derivatives. I'm wondering whether you can use the SABR closed form solution of ...
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### Does a barrier breach in a geared put structured note result in greater losses for the investor vs a plain knock in barrier?

I understand how knock in barriers work. But what do geared put in a structured note mean? My understanding is in a geared put vs a regular knock in barrier, the loss for the investor is higher if the ...
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### Greeks for options without bid price

It is very common to be long option without any bid price. What would be the best way to estimate Greeks for such an option? At the ask price? 1/2 of ask?
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### Book/Reference on LEAPs/ Long dated options

Can anyone suggest a book on pricing and trading in LEAPs / Long dated options (maturity atleast 6 months )or a generic book which covers this topic in great detail. I’m specifically looking at how ...
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### Price of a double barrier knock-in option

According the paper of Hui (1996) - One-touch double barrier binary option values the price of a knock-out double barrier option is: This option pays out a predefined cash amount if the lower or ...