Tags » Derivatives

Breakeven Price for a Bull Spread

Most likely calls will be used

Breakeven Price = Lower Strike Price +

OR

Breakeven Price = Higher Strike Price – 24 more words

Level 2

Breakeven Price for a Bear Spread

Most likely puts will be used.

Breakeven Price = Lower Strike Price +

OR

Breakeven Price = Higher Strike Price – 24 more words

Level 2

A straddle trade

  • Purchasing both a put and a call on the same security.
  • Done to profit from a large move in either direction.
  • Executed prior to a big announcement.
Level 2

A key assumption of the Black-Scholes-Merton option valuation model is:

That the return of the underlying instrument follows geometric Brownian motion, implying a lognormal distribution of the return.

Level 2

The Black-Scholes-Merton model can be interpreted as:

a dynamically managed portfolio of the underlying instrument and zero-coupon bonds.

Level 2

Hedge Ratio formula

For Calls:

h = C+ minus C- / S+ minus S-

For Puts:

h = P+ minus P- / S+ minus S-

Level 2

Solving Linear Differential Equations: A Guide

Hello. This post will be a short guide on solving first order lienar ordinary differential equations (ODEs).

Prerequsites:

You should be able to comfortably know derivatives and integrals from calculus. 468 more words

Mathematics