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The Greeks – Vega
April 05, 2017
Concepts

The Greeks – Vega

Martin Noël

This week, we will look at another Greek variable, called vega. Vega measures the amount that an option contract’s price changes in response to a change in the volatility of the underlying asset. You will recall that an option’s time value is influenced by the time remaining until expiration and by the implied volatility of...

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3 years ago
Portfolio Diversifiers
March 30, 2017
Stock Options

Portfolio Diversifiers

Richard Croft

I assume that all investors understand the value of diversification. It is all about developing a long-term portfolio strategy that will deliver performance within a tolerable level of risk. Bonds are typically used as a portfolio diversifier. The fixed rate of interest delivers critical cash flow to the portfolio to offset the...

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3 years ago
Understanding Volatility Exchange Traded Products
March 28, 2017
Volatility

Understanding Volatility Exchange Traded Products

Hans Albrecht

Using volatility ETPs is a pure play way to target volatility for your portfolio – no strike risk to worry about. But make sure you understand the key points below very well before wading in… ——————— I’m often asked about long volatility exchange traded products (ETPs) –...

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3 years ago
The Greeks: Theta
March 28, 2017
Concepts

The Greeks: Theta

Martin Noël

This week, we will look at another Greek variable: theta. Theta measures the change in the price of an option following a change in the time remaining to its expiration. You will recall that an option’s premium has two components: intrinsic value and time value. But since an option that has reached expiration has run out of...

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3 years ago
The Greeks: Gamma
March 23, 2017
Concepts

The Greeks: Gamma

Martin Noël

Our last article showed how delta could help predict the future value of options following a change in the price of the underlying asset. We also learned that delta gives an indication of the equivalent stock position (ESP) on the underlying asset. Gamma Gamma measures the change in the value of delta relative to a change in...

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3 years ago
Will Volatility Revert to the Mean?
March 22, 2017
Other

Will Volatility Revert to the Mean?

Hans Albrecht

A crucial foundation for understanding how option volatility works is the concept of ‘mean reversion’. For a period, stocks can go up and stay up, and they can conversely go down and stay down. But option pricing will generally have trouble staying high or low for an extended length of time. So why do prices eventually move...

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3 years ago
The Greeks: Delta
March 17, 2017
Concepts

The Greeks: Delta

Martin Noël

In the last few articles, we have seen that there are several variables that have an impact on the value of options. This table illustrates how an increase in one of the variables affects the values of call and put options. As you can see, with all other things being equal, when one of the variables moves, we should expect the...

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3 years ago
Term Structure of Implied  Volatility
March 04, 2017
Concepts

Term Structure of Implied Volatility

Martin Noël

Changes in implied volatility provide information on options market participants’ expectations regarding future fluctuations in returns on a specific stock. For the purposes of this discussion, we will analyze volatility in the stock price of the Great Canadian Gaming Corporation (GC), which closed at $23.79 on February 24,...

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