Binomial Options Pricing Model
Developed in 1979 and based on selection of various times between the valuation date and expiration.
Developed in 1979 and based on selection of various times between the valuation date and expiration.
Created in 1973 by Black, Scholes, and Merton. Won the Nobel Prize for Economics. Considered to be one of the most important concepts in finance. It is used to compute the theoretical value of derivatives based on other investment assets. It requires five input variables;… Read More »Black-Scholes Options Pricing Model
A contract that had changes to its underlying due to a corporate action (eg. stock split/consolidation) that results in a change to the multiplier or strike price. The adjustment is made to retain the options value.
When options for the same underlying have significantly different IVs. Can occur for options expiring in the same month (price skew) or different months (time skew)
When lower strike price options of the same type have higher IV compared to those expiring in the same month.
Where options expiring in the same month have IVs that deviate from normal
Mini Index contracts exist for ES (S&P 500 futures) and NQ (E-mini Nasdaq 100 futures). The minimum price fluctuation for these would be 1/10 of the regular e-mini contract. (Regular tick 0.25 index points = $1.25 for MES and $0.50 for MNQ). The CBOE had… Read More »Mini-Contracts
Gamma is greater for Short DTE. Vega is large for Long DTEs. ATM Options with long DTE have large Vegas and ATM options with short DTE have large gammas and small Vegas