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Covered or hedge option strategies |
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Definition of Covered or hedge option strategiesCovered or hedge option strategiesstrategies that involve a position in an option as well as a position in the
Related Terms:Covered call writing strategyA strategy that involves writing a call option on securities that the investor Abandonment optionThe option of terminating an investment earlier than originally planned. Additional hedgeA protection against borrower fallout risk in the mortgage pipeline. American optionAn option that may be exercised at any time up to and including the expiration date. American optionAn option that can be exercised any time until its American-style optionAn option contract that can be exercised at any time between the date of purchase and Arbitrage-free option-pricing modelsYield curve option-pricing models. ![]() Asian optionoption based on the average price of the asset during the life of the option. Bargain-purchase-price optionGives the lessee the option to purchase the asset at a price below fair market Barrier optionsContracts with trigger points that, when crossed, automatically generate buying or selling of Basic business strategiesKey strategies a firm intends to pursue in carrying out its business plan. Basket optionsPackages that involve the exchange of more than two currencies against a base currency at Binomial option pricing modelAn option pricing model in which the underlying asset can take on only two Black-Scholes option-pricing modelA model for pricing call options based on arbitrage arguments that uses cafeteria plan a “menu” of fringe benefit options that includecash or nontaxable benefits Call an optionTo exercise a call option. Call optionAn option contract that gives its holder the right (but not the obligation) to purchase a specified Call OptionA contract that gives the holder the right to buy an asset for a call optionRight to buy an asset at a specified exercise price on or before the exercise date. Compound optionoption on an option. Covered callA short call option position in which the writer owns the number of shares of the underlying Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Covered PutA put option position in which the option writer also is short the corresponding stock or has Currency optionAn option to buy or sell a foreign currency. Dealer optionsOver-the-counter options, such as those offered by government and mortgage-backed Delivery optionsThe options available to the seller of an interest rate futures contract, including the quality Delta hedgeA dynamic hedging strategy using options with continuous adjustment of the number of options Doubling optionA sinking fund provision that may allow repurchase of twice the required number of bonds Down-and-in optionBarrier option that comes into existence if asset price hits a barrier. Down-and-out optionBarrier option that expires if asset price hits a barrier. Elasticity of an optionPercentage change in the value of an option given a 1% change in the value of the Embedded optionAn option that is part of the structure of a bond that provides either the bondholder or Equity optionsSecurities that give the holder the right to buy or sell a specified number of shares of stock, at Escalating Price OptionA nonqualified stock option that uses a sliding scale for European optionoption that may be exercised only at the expiration date. Related: american option. European optionAn option that can be exercised only on its expiration date. European-style optionAn option contract that can only be exercised on the expiration date. Exercising the optionThe act buying or selling the underlying asset via the option contract. Exit OptionsA variety of options available to an investor to recover their invested capital and the return on their investment. Foreign currency optionAn option that conveys the right to buy or sell a specified amount of foreign Futures optionAn option on a futures contract. Related: options on physicals. Garmen-Kohlhagen option pricing modelA widely used model for pricing foreign currency options. Greenshoe optionoption that allows the underwriter for a new issue to buy and resell additional shares. Heavenly Parachute Stock OptionA nonqualified stock option that allows a deceased option holder’s estate up to three years in which to exercise his or her HedgeA transaction that reduces the risk of an investment. HedgeA securities transaction that reduces or offsets the risk on an existing Hedge fundA fund that may employ a variety of techniques to enhance returns, such as both buying and Hedge inventoryExcess inventories kept on hand as a buffer against contingent Hedge ratio (delta)The ratio of volatility of the portfolio to be hedged and the return of the volatility of the Hedged portfolioA portfolio consisting of the long position in the stock and the short position in the call Incentive Stock OptionAn option to purchase company stock that is not taxable Index and Option Market (IOM)A division of the CME established in 1982 for trading stock index Index optionA call or put option based on a stock market index. Interest OptionOne of several investment accounts in which your premiums may be invested within your life insurance policy. Intrinsic value of an optionThe amount by which an option is in-the-money. An option which is not in-themoney Irrational call optionThe implied call imbedded in the MBS. Identified as irrational because the call is Liability funding strategiesInvestment strategies that select assets so that cash flows will equal or exceed Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Liquid yield option note (LYON)Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co. Long hedgeThe purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used Lookback optionAn option that allows the buyer to choose as the option strike price any price of the Margin requirement (Options)The amount of cash an uncovered (naked) option writer is required to Money market hedgeThe use of borrowing and lending transactions in foreign currencies to lock in the Multi-option financing facilityA syndicated confirmed credit line with attached options. Naked option strategiesAn unhedged strategy making exclusive use of one of the following: Long call Nonqualified Stock OptionA stock option not given any favorable tax treatment OptionGives the buyer the right, but not the obligation, to buy or sell an asset at a set price on or before a OptionSee call option and put option OptionA right to buy or sell specific securities or commodities at a stated OptionRight to buy or sell a specified property at a specified amount at some time in the future. Option-adjusted spread (OAS)1) The spread over an issuer's spot rate curve, developed as a measure of Option elasticityThe percentage increase in an option's value given a 1% change in the value of the Option not to deliverIn the mortgage pipeline, an additional hedge placed in tandem with the forward or Option premiumThe option price. Option priceAlso called the option premium, the price paid by the buyer of the options contract for the right Option sellerAlso called the option writer , the party who grants a right to trade a security at a given price in Option writeroption seller. Options contractA contract that, in exchange for the option price, gives the option buyer the right, but not Options contract multipleA constant, set at $100, which when multiplied by the cash index value gives the Options on physicalsInterest rate options written on fixed-income securities, as opposed to those written on Out-of-the-money optionA call option is out-of-the-money if the strike price is greater than the market price Path dependent optionAn option whose value depends on the sequence of prices of the underlying asset Perfect hedgeA financial result in which the profit and loss from the underlying asset and the hedge position Postponement optionThe option of postponing a project without eliminating the possibility of undertaking it. Put an optionTo exercise a put option. Put optionThis security gives investors the right to sell (or put) fixed number of shares at a fixed price within Put OptionA contract that gives the holder the right to sell an asset for a put optionRight to sell an asset at a specified exercise price on or before the exercise date. Put OptionContract that grants the right to sell at a specified price at some time in the future. Quality optionAlso called the swap option, the seller's choice of deliverables in Treasury Bond and Treasury real optionsoptions embedded in real assets. Sell hedgeRelated: short hedge. Short hedgeThe sale of a futures contract(s) to eliminate or lessen the possible decline in value ownership of Split-fee optionAn option on an option. The buyer generally executes the split fee with first an initial fee, Stock index optionAn option in which the underlying is a common stock index. Stock optionAn option in which the underlying is the common stock of a corporation. stock optiona right allowing the holder to purchase shares of common stock during some future time frame and at a specified price Stock optionA right to purchase a specific maximum number of shares at a specific Tax deferral optionThe feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |