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Derivatives

Extrinsic Value

The intrinsic value is the inherent value of an option determined by its underlying asset's current price. This means that the extrinsic value is influenced by factors such as time until expiration, volatility, and interest rates.

Understanding the concept of extrinsic value is crucial for investors in the realm of finance. It refers to the additional value that an option holds beyond its intrinsic price, which is based on the underlying asset's current market price. In simpler terms, it is the premium that investors are willing to pay for the potential future profits of the option. However, this value is not set in stone and is subject to various external factors such as time, volatility, and interest rates.

Out-of-the-money

An option that would result in a loss upon immediate exercise is known as an out-of-the-money option. Specifically, a Call option is considered out-of-the-money when the cur...

Let's dive into the concept of Bull Spread, a strategy commonly used by options traders to capitalize on a predicted increase in the price of the underlying asset. This stra...

Last Trading Day

In finance, the last trading day is the ultimate opportunity for a derivative contract to be either traded or settled before the delivery of the underlying asset or cash set...

This allows them to sell the stock at a higher price, making a profit. On the other hand, a call option gives the holder the right to buy a stock at a stated price within a f...

They give the holder the right, but not the obligation, to buy or sell the underlying shares at a specific price on or before the expiration date. In the world of finance, t...

Deliverable Grades

Futures contracts are an essential tool for traders in the financial market. As a knowledgeable professor of finance, it is important to understand the concept of a futures ...

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Trading Terms

Trading Terms encompass terminology and phrases commonly used in financial markets, including terms

Financial Instruments

Legal contracts that represent financial value, such as stocks, bonds, options, futures, and various

Taxes

All terminology and concepts related to various tax types, tax laws, and taxation principles.

Stocks

All terms and concepts related to stocks, also known as equities, which represent ownership shares i

Currency

All terms related to the system of money in general use in a particular country, representing a medi

Corporate Actions

Terms related to decisions and events initiated by a company that can impact its stock, such as divi

Technicals

All terms and concepts related to technical analysis in finance, which involves using historical pri

Bank Deposits

All terms and concepts related to the placement of money in a bank account, including savings accoun

Loans

All terms and concepts related to borrowing money, including different types of loans, interest rate

Mutual Funds

All terms and concepts related to mutual funds, which are investment vehicles that pool funds from m

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