Derivatives, Futures & Options — 5 Terms Defined

Implied Volatility Derivatives, Futures & Options % The volatility figure that, put into an option pricing model, reproduces the option's current market price. Test: solve the pricing model for the volatility input that makes the model price equal the observed market price

In the Money Derivatives, Futures & Options qualitative An option that would have positive value if exercised immediately. Call: Spot > Strike; Put: Spot < Strike

Index Futures Derivatives, Futures & Options ₹ A futures contract whose underlying is a stock market index rather than a single security. Contract Value = Index Level x Lot Size; settlement is in cash against the final index value

Initial Margin Derivatives, Futures & Options ₹ The deposit required before a derivative position can be opened, held as collateral against potential losses. Initial Margin = SPAN Margin + Exposure Margin, computed by the clearing corporation for the portfolio

Iron Condor Derivatives, Futures & Options ₹ A four-leg position writing an out-of-the-money call and put while buying further out-of-the-money protection on both sides. Net Credit = Premiums Received - Premiums Paid; Maximum Loss = (Width of the Wider Wing - Net Credit) x Lot Size