What Is Bull Spread – Trading Strategy and Example

What Is Bull Spread A bull spread is a trading strategy that involves buying and selling options contracts with the same expiration date but different strike prices. It is a bullish strategy that aims to profit from an increase in the price of the underlying asset. The goal of a …

What is At the Money (ATM) in Options Trading? Explained

What is At the Money (ATM)? In options trading, the term “At the Money” (ATM) refers to a situation where the price of the underlying asset is equal to the strike price of the option. This means that the option is neither in-the-money nor out-of-the-money. At the money options are …

What Is a Simple Agreement for Future Tokens (SAFT) in Crypto?

What Is a Simple Agreement for Future Tokens (SAFT) in Crypto? A Simple Agreement for Future Tokens (SAFT) is a legal framework that allows cryptocurrency startups to raise funds by selling tokens to accredited investors before the tokens are actually created and distributed. It is a type of investment contract …

What Is a Short Call Option and How Does It Work?

Working of Short Call Options When you sell a short call option, you are essentially taking on the obligation to sell the underlying asset if the option is exercised by the buyer. This means that you are betting on the price of the underlying asset to decrease or stay below …

What Is a Reserve Currency U.S. Dollar’s Role and History

Definition and Importance A reserve currency is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. It is used for international transactions, investments, and as a store of value. The importance of a reserve currency lies in its ability to …

What Is a Naked Put and How Does It Work

What Is a Naked Put? How Does a Naked Put Work? When an investor sells a naked put, they are essentially taking on the obligation to buy the underlying stock at the strike price if the buyer of the put option decides to exercise it. The investor receives a premium …

What Is a Naked Option, How Naked Calls and Puts Work

What are Naked Options? When trading naked options, there are two types: naked calls and naked puts. A naked call is when the trader sells a call option without owning the underlying stock. A naked put is when the trader sells a put option without holding the underlying stock. Traders …

What is a Job Lot and How Can It Benefit Your Business?

What is a Job Lot? A job lot refers to a large quantity of goods or products that are sold together as a single unit. It is a common practice in the business world, where companies purchase surplus or excess inventory from manufacturers or wholesalers at a discounted price. Definition …

What Is a Grantor? Responsibilities, Role, and 2 Types

What Is a Grantor? Grantors play a crucial role in the trust administration process. They have specific responsibilities and duties that must be fulfilled to ensure the proper functioning of the trust. These responsibilities include: 1. Creating the Trust The first responsibility of a grantor is to create the trust. …

What Is a Direct Quote Definition in Currency and Formula

What Is a Direct Quote Definition in Currency and Formula A direct quote in currency refers to the exchange rate between two currencies where the domestic currency is the base currency and the foreign currency is the quote currency. It represents the amount of quote currency required to buy one …

What is a Democracy? Definition, History, Countries

What is a Democracy? A democracy is a form of government where power is vested in the people, who exercise it directly or through elected representatives. It is a system that allows citizens to participate in decision-making processes, ensuring that their voices are heard and their rights are protected. Principles …

What Is a Barrier Option? Knock-in vs Knock-out Options

What is a Barrier Option? Types of Barrier Options There are two main types of barrier options: knock-in options and knock-out options. Knock-in options: A knock-in option becomes active or “knocks in” when the underlying asset’s price reaches the barrier level. Once the barrier is hit, the option starts behaving …

What Are Stock Options: Parameters, Trading, Examples

Parameters of Stock Options 1. Strike Price 2. Expiration Date The expiration date is the last day on which the option can be exercised. After this date, the option becomes worthless and expires. It is important to note that options have a finite lifespan and must be exercised or sold …

What Are Pips in Forex Trading and What Is Their Value?

What Are Pips? In the world of forex trading, pips play a crucial role. A pip, short for “percentage in point,” is the smallest unit of measurement used to express changes in the value of a currency pair. It represents the fourth decimal place in most currency pairs, except for …

Warehouse Financing: Definition, Example, Vs Warehouse Lending

What is Warehouse Financing? Warehouse financing is a type of short-term funding provided to businesses that need capital to purchase and store inventory. It is commonly used by wholesalers, distributors, and retailers who need to stock up on goods before selling them to customers. With warehouse financing, a lender provides …

Volatility Swap Explained: How it Works and Example

What is a Volatility Swap? A volatility swap is a financial derivative that allows investors to trade or speculate on the future volatility of an underlying asset, such as a stock, bond, or commodity. It is a type of derivative contract that derives its value from the expected future volatility …

Volatility Arbitrage Explained: Strategies and Mechanics

Strategies for Volatility Arbitrage Volatility arbitrage is a trading strategy that aims to profit from the difference in implied volatility between related securities. There are several strategies that traders can employ to take advantage of volatility arbitrage opportunities: 1. Calendar Spreads A calendar spread involves buying and selling options with …

VIX Option Explained: How it Works in Options Strategy

How VIX Option Works: Pricing and Volatility When trading VIX options, it is important to understand how they are priced. VIX options are European-style options, which means they can only be exercised on the expiration date. The price of VIX options is determined by several factors, including the current level …

Vanilla Option – Definition, Types, Features, and Example

Vanilla Option: Definition and Features A vanilla option is a type of financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price within a specific time period. It is called “vanilla” because it is the most basic …

Wasting Asset: Definition And Examples In Finance

What is a Wasting Asset? Characteristics of Wasting Assets Wasting assets typically have the following characteristics: Depreciation: Wasting assets depreciate in value over time due to wear and tear, obsolescence, or other factors. Finite Lifespan: Wasting assets have a limited lifespan and are expected to eventually become obsolete or non-functional. …

Volatility In Finance And Its Impact On Stocks

What is Volatility? Volatility is a term commonly used in finance to describe the degree of variation or fluctuation in the price of a financial instrument, such as a stock, bond, or commodity, over a specific period of time. It is a measure of the uncertainty or risk associated with …

Time Value And Its Impact On Extrinsic Value

Exploring the Concept of Time Value Time value is a fundamental concept in options trading that refers to the additional value attributed to an option due to the amount of time remaining until its expiration date. It is a measure of the potential for the option to gain intrinsic value …