 Shares & Mutual Funds - I would like to gain basic understanding of these terms.Can anyone help me? |
Shares & Mutual Funds - I would like to gain basic understanding of these terms.Can anyone help me.
Which is the best investment now a days
- shares/Mutual Funds or Purchase of Land ???... |
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 £5,000 savings...what to do? |
I've got 5000 savings and dont know whats best?
Im 22 and at present work on cruiseships and plan to do so until new year...and i earn less than 6k. Well the pittance that i earn is tax ... |
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 Can I as an American open up a bank account in Europe and convert all my dollars to Euros ? |
| I have a few thousand dollars and I don't trust the dollar. I do not want to get old and then all the money I have saved becomes totally worthless.... |
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 Do you believe the gold and metal and oil prices will end soon.? |
Additional Details
i just heard warren buffet say to avoid oil and metal because they have reached their peak and will start dropping soon and he also said to invest in agricultural ... |
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 Looking for 10-15% return ??? |
I am looking for 10-15% return with secured principal...Does anyone have idea except GIC...
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 In India, What is a PAN number? |
| What is it? When do you have to have one? Is it only available to Indian citizens? I am of half indian descent, British citizen , do I need one for any reason? Thanks.... |
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 Why are the big financial institutions going down the swanny? |
The news recently is dominated by the big banks and insurance companies going belly up and goverments running to their aid, why are they going down.
... |
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 Is it a good Idea investing in Ford with their stock at $1.61 a share? |
| I was thinking of invest in like 4k in Ford Motor company stock , figuring it cant get much lower , besides 3 year ago it was $10 a share. So if it gets back up to $10 a share I will cash in giving ... |
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 Considering Opening a Scott Trade Account... Any advice? |
Let me preface by my previous experiance.
I opened an E*Trade Account several years ago with the minimum $1000..
I bought 100 shares of HASBRO @ around 7.50 a share and 100 ... |
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 What is 5.56% of $23500.00? |
| Please show so i can do similar calculations in the future,Thanks.... |
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 I have $750 to invest for 1 month. What's the best way to maximize my return? |
| I need the money in January as part of my security deposit for a new apartment.... |
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Jack | Volatility and derivatives? |
When an institutional trader says to me âWe have been âshortâ volatilityâ, what does he mean? What instruments would he be trading to take positions against volatility? How does it work?
Additional Details
Spock - Yes it does and I think I understand it but may need to read it a few more times :) Great answer, thanks :) |
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Spock (rhp)
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good question
let us define volatility in operational terms as the 14 day moving average of the True Range, where true range is today's high minus today's low, plus the amount of any gap between today's range and yesterday's.
long volatility means to bet that volatility will increase in the future. you do this by buying both calls and puts in the market [long straddles if the number of your puts and calls are equal].
so then you go short volatility by selling both puts and calls into the market [or short straddles, etc.]
***
since there are four or five components which together make up the price of an option and one of them is perceived volatility, if you are short [you wrote and sold] options and volatility decreases, then the value of those options decreases. you buy them back, and you've made a profit.
does this help? |
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Nick Z
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There is an options index at the Chicago Board Options Exchage called VIX. VIX index measures average volatility of option prices for S&P 500 companies at CBOE. And you can buy call and put options and trade futures for this VIX index at CBOE.
Since there are no stock prices for the VIX index, the values of VIX call and put options depend only on volatility. And you can trade volatility directly by buying and selling VIX options.
Perhaps the institutional trader meant that they've bought some VIX put options.
You can find out more about the VIX index and VIX options here: http://www.cboe.com/micro/vix/VIXoptionsQRG.pdf |
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OPM
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The VIX is priced on volatility, if you are short volatility you believe volatility will fall and have written a put on the VIX. |
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StopSpending
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An option is a derivative that allows you to either buy or sell an asset, but not be obligated to do so. In other words, I can buy something but can walk away from the transaction.
The payoff profile of an option is a non-linear function of the asset that you can buy or sell. At the expiration of a call option (the right to buy an asset), the option is worthless if the stock price is below the price at which you have the right to buy; however, you participate one-for-one in the upside of the stock
This non-linear relationship between the payoff of the option and the price of the asset that you can buy or sell makes the option's value dependent upon the value of the asset that you can buy or sell. (This is where I skip the complicated math.) If the expected FUTURE volatility of the stock goes up, the value of the option goes up (in almost all but an extreme case).
To be short volatility means that you are, in some sense, net short options. You may have both bought and sold options, but from the sense of your exposure to changes in the future expectation of volatility, you are net short options. (I'm really being loose in my language here, but I hope you catch my drift.)
Your institutional trader friend is net short options in a way that makes him/her money if the expectation of future volatility declines and loses money if the expectation of future volatility rises. |
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E Viking
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no idea |
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carolus
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is man stable at his devices? if we get a correct answer perhaps then we can tackle "volatility"! |
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The Badger!
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hmmm he's not trying to confuse you, there is a lot of financial jargon to understand in this industry people who deal in stocks hate volatility however when it comes to derivatives they absolutely love volatility short means the trend is falling and long means the trend is rising through the range of volatility over a period of time. devivatives are options and futures
futures are the agreed exchange on a given date in the future hence being called futures and options are the options to take up a trade that is set for the future tricky stuff and confusing thats why the proffesionals get paid so well.
next time you speak to this trader and he confuses you dont be afraid to ask for him/her to explain theres nothing wrong with not knowing the jargon!! |
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Ely C
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Derivatives, is practically betting on the performance of certain stocks of wheteher it will go up or down for a certain amount of time alloted. It is like you are betting on the race tracks but with higher risks and higher odds and you are using your share of stocks or probably your cash.
Or just go to Vegas or the Boardwalk where the casinos are, they are similar. Or maybe when you bet on a boxing match and put your money to your favorite fighter, the principles are the same. |
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Patrick
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He is trying to confuse you with big words. Other than that, I can't answer any further because I don't know how large or diversified your portfolio is.
At this point, there is no lack of volatility in the equity markets due to the subprime credit thing. However, this doesn't translate equally to other asset classes such as the commodities. |
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