Derivatives, Futures & Options
65 terms · page 1 of 3
American Option
An option that may be exercised at any time up to and including its expiry date.
Derivatives, Futures & OptionsArbitrage
Simultaneously buying and selling equivalent assets in different markets to lock in a price difference without directional risk.
Derivatives, Futures & OptionsAt the Money
An option whose strike is at or nearest to the current price of the underlying.
Derivatives, Futures & OptionsBackwardation
A condition in which futures prices are below the spot price, and later expiries are priced below nearer ones.
Derivatives, Futures & OptionsBasis
The difference between a futures price and the spot price of its underlying.
Derivatives, Futures & OptionsBear Put Spread
Buying a put at one strike and writing a put at a lower strike with the same expiry, capping both cost and gain.
Derivatives, Futures & OptionsBlack-Scholes Model
A mathematical model that prices European options from the spot price, strike, time to expiry, interest rate and volatility.
Derivatives, Futures & OptionsBull Call Spread
Buying a call at one strike and writing a call at a higher strike with the same expiry, capping both cost and gain.
Derivatives, Futures & OptionsButterfly Spread
A three-strike position buying one option at each outer strike and writing two at the middle strike.
Derivatives, Futures & OptionsCalendar Spread
Writing an option in a nearer expiry and buying the same strike in a further expiry, or the equivalent in futures.
Derivatives, Futures & OptionsCall Option
An option giving its buyer the right to buy the underlying at the strike price on or before expiry.
Derivatives, Futures & OptionsCash and Carry Arbitrage
Buying the underlying in the cash market while selling its futures, locking in the basis as a return.
Derivatives, Futures & OptionsCash Settlement
Settlement of a derivative by paying the cash difference between the contract price and the final settlement price.
Derivatives, Futures & OptionsCash-Secured Put
Writing a put while setting aside enough cash to buy the underlying if assigned.
Derivatives, Futures & OptionsCollar
Holding shares while buying a protective put and writing a call, funding the protection with the premium received.
Derivatives, Futures & OptionsContango
A condition in which futures prices are above the spot price, and later expiries are priced above nearer ones.
Derivatives, Futures & OptionsContract Value
The notional value of the underlying that one derivative contract controls.
Derivatives, Futures & OptionsCost of Carry
The net cost of holding the underlying until a derivative's expiry, comprising financing cost less any income received.
Derivatives, Futures & OptionsCovered Call
Writing a call option against shares already owned, so the delivery obligation is covered by the holding.
Derivatives, Futures & OptionsDelta
The rate at which an option's price changes for a one-unit change in the underlying.
Derivatives, Futures & OptionsDerivative
A contract whose value is determined by the price of another asset, called the underlying.
Derivatives, Futures & OptionsEuropean Option
An option that may be exercised only on its expiry date, not before.
Derivatives, Futures & OptionsExpiry Date
The date on which a derivative contract ceases to exist and is settled.
Derivatives, Futures & OptionsExposure Margin
An additional margin charged on top of SPAN margin as a buffer against risks the scenario model does not capture.