Topic: Derivatives

What are Delta-One Trading Desks?

What does delta one refer to? Delta is the sensitivity of a derivative’s theoretical value to its underlying. Options have deltas ranging from (0,1) for calls and (-1,0) for puts. This gives them non-linearity, i.e. a call becomes more valuable faster the higher...

Put Call Parity in Options

The payoff profile of the options can be used to create more complex positions. A long position in the underlying asset can be decomposed into a long call plus a short put with the same strike price and maturities. Pay on purchase of a call option is as follows: Pay...

Case Study: Amaranth Derivatives Losses

Background of the case This article describes the market manipulation case by Amaranth Advisors who had exposure to natural gas futures, swaps and options derivatives contracts as Calendar Spreads. Amaranth’s trading strategy was long winter and short non-winter...

Spreadsheet: Option Trading Strategies

Download this free spreadsheet to form various option strategies and view their payoff diagrams. The spreadsheet allows you to create option strategies by combining long and short positions in stocks, call options and put options. You can select unto 3 call options...

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