559 entries
Derivatives
Options, futures, forwards, swaps — and the Greeks and pricing models that price them.
- Volga (Vomma): The Convexity of Vega in Options Pricing Volga (vomma) is the second derivative of option price with respect to volatility, measuring vega convexity. Essential for pricing options on volatility and volatility swaps.
- Warehouse Receipt An exchange-approved certificate of stored physical commodities that serves as proof of ownership and satisfies futures contract delivery obligations.
- Weather Derivative A contract whose payoff depends on meteorological outcomes such as temperature, rainfall, or snow rather than asset prices.
- Weather Derivatives and Futures Weather derivatives are contracts that pay based on temperature, rainfall, or other climate measurements, allowing energy and agriculture firms to hedge weather risk.
- Weather Swap A derivative contract paying out based on temperature or precipitation, allowing weather-sensitive businesses to hedge revenue and cost volatility.
- Weekly Options Short-dated options contracts expiring every Friday; accelerated time decay and high gamma create rapid profit-and-loss swings suitable for tactical trading.
- What Different Futures Curve Shapes Signal How upward-sloping (contango), downward-sloping (backwardation), and flat futures curves across commodities, rates, and equity indices reveal storage costs, convenience yields, and market expectations.
- What Happens to an In-the-Money Option at Expiration When an in-the-money option expires, the holder must decide: automatic exercise, cash settlement, or let it lapse—but brokers often exercise to protect holder value.
- What Happens to an In-the-Money Option at Expiration When an in-the-money option reaches expiration, automatic exercise, cash or stock settlement, and margin impact depend on contract rules and broker handling.
- What Happens When an Option Expires Out of the Money What happens when an option expires out of the money: the buyer loses the full premium paid, the seller keeps it, and the contract becomes worthless with no asset delivery.
- Why Futures Basis Converges to Zero at Expiry Futures basis converges to zero at expiry because arbitrage eliminates price gaps between futures and spot price at delivery.
- Why Option Premium Decay Accelerates Near Expiration How theta decay becomes exponential in the final weeks of an option's life, with examples showing why time value erodes fastest as expiration approaches.
- Why Options Lose Value Over Time Explanation of time decay in options: why time value erodes, why decay accelerates near expiration, and its impact on buyers and sellers.
- Why Theta Decay Accelerates Near Option Expiration How theta decay, the rate of option premium erosion, accelerates exponentially in the final days before expiration as time-value vanishes.
- Window Barrier Option A barrier option where the barrier level is only active during a specified time window within the option's life.
- Yield Curve Swap A swap that isolates exposure to the shape of the yield curve, letting traders bet on curve steepening or flattening.
- Zero Cost Collar A hedging strategy that protects long stock by combining a protective put and covered call at strikes chosen so the put cost is fully offset by call premium.
- Zero-Coupon Swap A swap where one or both parties defer receiving cash flows until maturity, concentrating the settlement into a single terminal payment.
- Zomma The third-order derivative measuring how gamma changes as implied volatility changes, revealing convexity in both price and volatility dimensions.
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