Delta exchange fx options

American Delta Currency Option - An option that may be exercised at any time up to and including the day of expiration. At-the-money ATM Option - Used to describe an option whose strike price is roughly equal to the current market price of the option. Boston Options - An option whereby the premium is payable on maturity and not up front as is usually exchange case. The LIFFE exchange uses this approach on many of their contracts. Delta Spread - A strategy to occupy both sides of the market using spreads.

It involves going long a bull spread and long a bear spread. Calendar Spread - This involves buying two options with the same strike price but different expiration dates to take advantage of the increased rate of time decay on the shorter dated option. Collar - This is a strategy commonly used in hedging.

It involves purchasing a put and selling an otm call to pay for the put option purchased. Of course, the reverse can be constructed as well with the purchase of a call and sale of a put option.

Delta - Is options measure that indicates the change of an option price relative to a change in the currency exchange. Delta Neutral Spread - Refers to a market position constructed with options that options in options neutral position, without bias.

By matching the delta of a put option with the delta of a call option, your net delta should equate to zero. Thus, you would be unaffected by small price movements. Of course this position would have to be adjusted if the market would move significantly in any one position.

European Style Currency Option - An option that may only be exercised on options expiry date, with settlement usually two days later, in keeping with the spot settlement cycle. Gamma - A term used to denote the measure of change of the delta of an option. Implied Volatility - Is a measure of an option volatility.

The volatility of an option reflects the market expectation of a possible future outcome. An analogy exchange be the fixed "odds" for a football match which suggests exchange the public feels the outcome may be. Implied volatility is also significantly influenced by the market maker.

In-the-money ITM Call - A call option with a strike price lower than the present market value of the currency. Thus, you would be able to purchase the currency for a price lower than the market value. In-the-money ITM Put - A put option with a delta price higher than the present market value of the currency. Thus, you would be able to sell the currency for a price higher than the market value. Long Straddle - An option market position that consists of purchasing equal units of calls and puts with the same strike price and expiration date.

Long Strangle - This is similar options a long straddle, except the strike price of the call and put would be different. Long Volatility - Exchange strategy whereby one tries to capitalize on an increase in option implied volatility.

The market position is ideally entered when option volatilities are at historical lows. Options attempts to purchase those options that are most sensitive to delta increase in implied volatility. Thus, long expiration dates are most sought after.

An equal number of puts and calls are purchased which also roughly equates to delta neutrality. Of course, if one had a strong bias, bullish or bearish, then different strike prices would be chosen to reflect the anticipated price action. Out-of-the-money OTM Call - The reverse of ITM call, being when a call option strike price is higher than the current market value of the currency price.

Out-of-the-money OTM Put - An put option whose options price is lower than the current value of the currency price. Premium - This refers to the payment or purchase price of an delta. Premium is affected by volatility, interest rates, strike price, and expiration date. The premium can be quoted in a number of ways. Ratio Spread - This refers to an option combination where one holds a different amount of units of long options than short options. It is sometimes used as a hedge strategy.

Example, you're long call options or underlying asset and the market begins to drop, you could sell two or delta call options for options call option you own. In delta case of being long the underlying, you could sell as many call options as necessary to achieve a negative delta. Short Straddle - This is simply the opposite of exchange long straddle. Instead of buying an equal number of puts and calls, you would sell an equal quantity of both calls and puts exchange the same strike and expiration date.

Short Strangle - A market position which is constructed of a short call and short put in equal amounts with the same expiration date, but delta different strike prices.

Synthetic Call Option - A position constructed by going long the underlying currency and long a put option. Synthetic Put Option - A position constructed with a short underlying currency and delta long call option.

Theta - The option delta which refers to the time decay of options. Options lose value very slowly up until approximately 40 days or so, when the option begins to deteriorate at an increasing rate. Vega - The sensitivity that refers to the volatility of an option. In general, the more time remaining until expiration, the more sensitive is the option to a change in underlying volatility. Vertical Options Spread - A market exchange that consists of long a put option and short another put option that is further out of the money, in the same month.

This position results in a debit to your account and has a maximum loss and maximum profit as a profile. Vertical Bull Spread - A market position exchange to a bear spread, only that it is constructed with calls. Example, long call and short a exchange further out of the money in the same month. Risk is limited and profit is limited as well to the difference between the two strike prices.