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A protective option constructed with a put to cover shares of stock that an investor owns is called a protective put or married put, [1] [2] while one constructed with a call to cover shorted stock is a protective call or married call. [3] In equilibrium, a protective put will have the same net payoff as merely buying a call option, and a ...
These strategies may provide downside protection as well. Writing out-of-the-money covered calls is a good example of such a strategy. The purchaser of the covered call is paying a premium for the option to purchase, at the strike price (rather than the market price), the assets you already own.
A condor is a limited-risk, non-directional options trading strategy consisting of four options at four different strike prices. [1] [2] The buyer of a condor earns a profit if the underlying is between or near the inner two strikes at expiry, but has a limited loss if the underlying is near or outside the outer two strikes at expiry. [2]
Payoff amount declines: If you plan to make extra payments to pay off your mortgage early, you might not benefit as much from MPI because the loan payoff amount decreases as the mortgage is paid ...
Mortgage insurance is an insurance policy that protects the mortgage lender, but the borrower is the one who pays for it. With mortgage insurance, the lender or titleholder is covered in case you ...
Debt snowball method: What it is and how it works. With the debt snowball method, you order your debts by size of outstanding balance and make minimum payments, putting any extra money in your ...
A long butterfly options strategy consists of the following options: Long 1 call with a strike price of (X − a) Short 2 calls with a strike price of X; Long 1 call with a strike price of (X + a) where X = the spot price (i.e. current market price of underlying) and a > 0. Using put–call parity a long butterfly can also be created as follows:
The technique applied then, is (1) to generate a large number of possible, but random, price paths for the underlying (or underlyings) via simulation, and (2) to then calculate the associated exercise value (i.e. "payoff") of the option for each path. (3) These payoffs are then averaged and (4) discounted to today.