Welcome To Options Trading For Newbies
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| STANDARD DEVIATION - The square root of the mean of the squares of the deviations of each member of a population (in simple terms, a group of prices) from their mean. Ina normal distribution (or bell curve, one standard deviation encompasses 68% of all possible outcomes. STATISTICAL VOLATILITY (SV) - Measures the magnitude of the asset’s recent price swings on a percentage basis. It can be measured using any recent sample period. Regardless of the length of the sample period, SV is always normalized to represent a one-year, single Standard Deviation price move of the underlying. Note: It is important to remember that what is needed for accurate options pricing is near-term future volatility, which is something that nobody knows for sure. STOP ORDER - “Stop-Loss” and “Stop-Limit” orders placed on options are activated when there is a trade at that price only on the specific exchange on which the order is located. They are orders to trade when its price falls to a particular point, often used to limit an investor’s losses. It’s an especially good idea to use a stop order if you will be unable to watch your positions for an extended period. STRADDLE - A strategy involving the purchase (or sale) of both call and put options with the same strike price, same expiration, and on the same underlying. A short straddle means that both the call and put are sold short, fora credit. Along straddle means that both the call and put are bought long, fora debit. STRANGLE - A strategy involving the purchase or sale of both call and put options with different strike prices - normally of equal, but opposite, Deltas. The options share the same expiration and the same underlying. A strangle is usually a position in out-of- the-money options. A short strangle means that both the calls and puts are sold short, fora credit. Along strangle means both the calls and puts are bought long, fora debit. Download 1.29 Mb. Share with your friends:
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