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The net volatility of an option spread trade is the volatility level such that the theoretical value of the spread trade is equal to the spread's market price. In practice, it can be considered the implied volatility of the option spread.
Net volatility. Net volatility refers to the volatility implied by the price of an option spread trade involving two or more options. Essentially, it is the volatility at which the theoretical value of the spread trade matches the price quoted in the market, or, in other words, the implied volatility of the spread.
Finance. In finance, a credit spread, or net credit spread is an options strategy that involves a purchase of one option and a sale of another option in the same class and expiration but different strike prices. It is designed to make a profit when the spreads between the two options narrows . Investors receive a net credit for entering the ...
Historic volatility measures a time series of past market prices. Implied volatilitylooks forward in time, being derived from the market price of a market-traded derivative (in particular, an option). Volatility terminology. [edit] Volatility as described here refers to the actual volatility, more specifically:
In options trading, a bull spread is a bullish, vertical spread options strategy that is designed to profit from a moderate rise in the price of the underlying security. Because of put–call parity, a bull spread can be constructed using either put options or call options. If constructed using calls, it is a bull call spread (alternatively ...
It is a combination of positions with a riskless payoff. In options trading, a box spread is a combination of positions that has a certain (i.e., riskless) payoff, considered to be simply "delta neutral interest rate position". For example, a bull spread constructed from calls (e.g., long a 50 call, short a 60 call) combined with a bear spread ...
Volatility has been on the rise in markets since mid-July, with the CBOE's Volatility Index ( ^VIX) spiking sharply from the teens to over 65 at one point on Monday. But as our Chart of the Week ...
premiums are highest for in the money options and lower for at the money and out of the money options; Premiums increase with maturity. The option seller must be compensated more for committing to a fixed-rate for a longer period of time. Prevailing economic conditions, the shape of the yield curve, and the volatility of interest rates.
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