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15 Cards in this Set
- Front
- Back
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Historical volitility
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A measurement of the price movement of the underlying stock during a 12-month period. It helps project the magnitude of future price fluctuations.
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Theoretical
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Represents the theoretical value on an option based on the Black-Scholes formula. (blue book value)
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Delta
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Compares the price change of an option with the price change of its underlying stock. (range of .0-1)
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Gamma
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Compares the rate of change of delta with the rate of change in the price of underlying stock. (a gamma of .05 indicates that for every $1 the stock moves, the delta will inc. or dec. by $.05
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Theta
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compare the rate of time decay with the passing of each calendar day.
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Implied Volatility
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How much the stock is expected to move during the life of the option.
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Selling Puts
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Bearish strategy that involves creating a naked put option. Seller of put contract obligated to purchase shares of stock at predetermined price if the buyer of the contract chooses to exercise the contract.
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Bull Put Spread
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a credit spread that allows you to make money on uptrending stocks
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Bear call Spread
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a credit spread that allows you to make money on downtrending stocks
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Credit Spread
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Selling a higher priced option while simultaneously buying a lower priced option, creating credit in your account
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ROI
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Return on Investment
(maximum potential profit divided by maximum potential loss) |
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Bull Call Spread
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Buying a call option on a bullish stock (strike price lower than the current price of the stock)while simultaneously selling a call option on a bullish stock (strike price higher than the current price of the stock)
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Bear Put Spread
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buying a put option on a bearish stock (strike price higher than stike price of the put in next stop), and then selling a put option (stike price lower that current trading price of stock.
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Dialgonal Spread
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An option position where you purchase a high-priced opton (long side), and sell a
lower-priced option (short side)with a different expiration date to off set some of the costs of entering the long option position |
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diagonal bull spread
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buying a long term call option (strike price lower than current stock price, while selling a shorter term call option (strke price higher than strike price purchased in step 1.
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