A long put, therefore, is a short position in the underlying security, since the put gains value as the underlying price falls (they have a negative delta).Protective putscan be purchased as a sort of insurance, providing a price floor for investors to hedge their positions. ...
Why is Delta One so lucrative? If a Delta One desk sells 10 million SPX long on a swap it needs to hedge itself. Traditionally this would be done by buying 10 million dollars of SPX stocks (or the SPY ETF). But smarties figured out that there is a little bit of alpha in the mis-...
What is Options Trading? Options trading basically involves a contract that gives the holder right but not the obligation to buy or sell an underlying asset at particular time at a certain amount. Trading in options involves various factors such as the strike price of the option, the expiration...
Or, if an options position is exposed to directional risk, a trader may buy or sell the underlying security to becomedelta neutral. Dynamic hedging (ordelta-gamma hedging) is a strategy employed by derivatives traders to maintain offsetting positions on an ongoing basis. Why Would I Take an O...
What is the formula for delta of the option as a function of (U,D,R, Vu, Vd)? In New York, you can exchange $1 for 0.8319 or 0.6429. Suppose that, in Berlin, 1 costs 1.2507. How much profit can you earn on $21,368 using triangle arbitrage? Enter your answer roun...
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Theta refers to the rate of change in an options value relative to the passage of time. Learn what theta is, how it works and how it impacts your trading with examples.
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In regard to hedging: What is the futures basis and what is the basis risk? What is the difference between long position and short positions in commodity futures trading? When is it appropriate to take either short of long position? What ...
This is the true magic of options trading. Option Strategies give options traders the versatility to profit from any opinions that they have on an underlying stock and to limit risk even if that opinion moves against them. The creative use of Options Strategies makes stock options the most ...