23 lines
1.7 KiB
Plaintext
23 lines
1.7 KiB
Plaintext
982 Glossary
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Vega: the measure of how much an option's price changes for an incremental
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change-usually one percentage point-in volatility.
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Vertical Spread: any option spread strategy in which the options have different
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striking prices but the same expiration dates.
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Volatility: a measure of the amount by which an underlying security is expected to
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fluctuate in a given period of time. Generally measured by the annual standard
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deviation of the daily price changes in the security, volatility is not equal to the beta
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of the stock. Also called historical volatility, statistical volatility, or actual volatility.
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See also Implied Volatility.
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Volatility Skew: the term used to describe a phenomenon in which individual
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options on a single underlying instrument have different implied volatilities. I 11
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general, not only are the individual options' implied volatilities different, but they
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form a pattern. If the lower striking prices have the lowest implied volatilities, and
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then implied volatility progresses higher as one moves up through the striking
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prices, that is called a forward or positive skew. A reverse or negative skew works
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in the opposite way: The higher strikes have the lowest implied volatilities.
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Warrant: a long-term, nonstandardized security that is much like an option.
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Warrants on stocks allow one to buy (usually one share of) the common at a ("(•r
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tain price until a certain date. Index warrants are generally warrants on the pri<·<·
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of foreign indices. Warrants have also been listed on other things such as cross-('m
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rency spreads and the future price of a barrel of oil.
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Write: to sell an option. The investor who sells is called the writer. |