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Results tagged with options
Search options not deleted
user 218
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.
0
votes
1
answer
245
views
Why vega increases further out in time
Why do back months options have a higher vega than front month options?
If possible , kindly explain on an intuitive level without a lot of math. …
- 1,404
0
votes
1
answer
2k
views
Convert a call spread to a butterfly to mitigate risk
I do not have a source for this (apologies), but sometimes, I hear about option traders initiating a vertical spread(short) and then converting that call spread to a butterfly spread to mitigate risk. …
- 1,404
1
vote
1
answer
97
views
Does a call calendar lose its entire value if underlying increases well past the strike?
If I buy a call calendar spread, and the underlying increases, both options are in the money by the expiry of the short call. … So both options increase in value, but the short one increases less because it has more time decay. …
- 1,404
5
votes
2
answers
8k
views
Why an option has sometimes and implied volatility greater than 100%?
Sometimes, in an option chain, the implied volatility of an option is greater than 100% .
How is this possible? I mean, it is possible for 100$ stock to increase more than 100%, but not decrease more …
- 1,404
1
vote
0
answers
49
views
How to calculate a prepayment penalty on a mortgage
I have issued 2 mortgages...one with an option to prepay the loan, the other without that option.
I want an objective way of calculating the extra interest rate (compared to the second) and prepaymen …
- 1,404
3
votes
Short volatility strategy using strangles
The risk of a short strangle is theoretically infinite, and the max return is fixed (the premium received on the 2 legs). This remains true whether you target max return or max vega.
- 1,404
8
votes
1
answer
2k
views
How to approximate the time to mean reversion for implied volatility
Given an option and its implied volatility, and also the mean value of the implied volatility over the last 30 days, if we find that the current IV is significantly (> 1 std dev.) away from the mean, …
- 1,404
2
votes
Option arbitrage with dividends?
Generally no, because 'dividends' are already 'priced into' the options. …
- 1,404
2
votes
1
answer
167
views
How to manage risk on a call calendar when underlying is falling
Now, at expiry of the short option, the underlying has decreased significantly, and I am approaching my max loss(i.e both the options are close to 0). …
- 1,404