Chapter 5 Flashcards
Measures the rate of change of options premium based on the directional movement of the underlying
Delta
Measures the impact on premium based on the time left for expiry
Theta
Rate of change of delta itself
Gamma
Rate of change of premium based on change in volatility
Vega
Measures the sensitivity of the interest rate of the value
Rho
Gives the option holder the right to buy the underlying asset at a particular price which is fixed for that particular time frame
Call option
Allows you to buy a given asset at a certain exercise price
Option
Is an important variable to understand when entering into an option contract
Contract size
In options market an option contract size is ____
Standardized
Is the day on which all unexercised options in a particular series expire and is the last day of trading for that particular series
Expiry date
Is the predermined buying and selling price for the underlying shares if the option is exercised
Exercise price
An anchored price at which the two parties agree to enter into an options agreement
Strike price
Monwy required to be paid by the option buyer to the option seller
Premium
Arrived at by the negotiation between the taker an the writer of the option
Premium price
Displays the underlying stock price movements using discrete time binomial lattice tree
Binomial model
Generally measures the sensitivity of the option price to various paramameters that impact the value of an option.
Option greeks
One of the metrics used to measure volatile stocks is called
Beta
Helps you determined the possible magnitude of future moves of the underlying stock
Historical volatility
What is implied by the current market price and is used with theoritical models
Implied volatility
Helps set the current price of an existing option and helps options players assess the potential of a trade
Implied volatility
Derived by multiplying the stock price by the cumulative standard normal probability distribution function
Black-sholes model
Best known option pricing method
Black-sholes model
