How do I set a strike price for a future?

July 7, 2024 No Comments

A: Strike prices can be set for put and call options, but investors engaged in futures contracts are obligated to trade the underlying asset at the expiration date, regardless of price. Most stock futures do not make it to the expiration date – for a

After exercising a put option, can I still hold my option contract in order to sell it at a lower price?

July 7, 2024 No Comments

A: Once a put option contract has been exercised, that contract does not exist anymore. A put option grants you the right to sell a stock at a specified price at a specific time. The holder of a put option expects the price of the

Are We In A Bull Market Or A Bear Market?

July 7, 2024 No Comments

A: The Wall Street Journal and other media outlets often use 20% thresholds to label traditional uptrends and downtrends, stating a new bear market has begun when an index or other security falls 20% off its peak. Conversely, they announce the start of a new bull market when an index

Can a stop-loss order protect a short sale?

July 7, 2024 No Comments

A: The quick and simple answer to this question is yes. The major difference between a stop-loss order used by an investor who holds a short sale and one used by an investor with a long position is the direction of the stop’s execution. The individual with

Can an option be exercised on the expiration date?

July 7, 2024 No Comments

A: The use of options has increased dramatically over the years as a way to profit from or hedge against the volatile movements of stock prices. Not only can options be traded with stock as the underlying asset, they are also traded on foreign currency,

Do I own a stock on the trade date or settlement date?

July 7, 2024 No Comments

A: When buying shares, there are two key dates involved in the transaction. First is the trade date, which marks the date the buy order is executed in the market or exchange. Second is the settlement date, which marks the date and time the transfer of shares is

How accurate is the forward rate in predicting interest rates?

July 7, 2024 No Comments

A: Forward rates are extremely limited predictors of actual interest rates. This isn’t particularly surprising, given the multitude of determinant factors for interest rates or the nature and use of forward rates. The imperfections of forward rate forecasts tend to be most glaring before the

How can derivatives be used for risk management?

July 7, 2024 No Comments

A: Derivatives could be used in risk management by hedging a position to protect against the risk of an adverse move in an asset. Hedging is the act of taking an offsetting position in a related security, which helps to mitigate against adverse price movements.

How can I calculate the delta adjusted notional value?

July 7, 2024 No Comments

A: The delta adjusted notional value is used to show the value of an option. This is different from most other derivatives, which use gross notional value or, in the case of interest rate derivatives, 10-year bond equivalent value. Investors can calculate the delta adjusted notional

How can I identify stocks that also trade as options?

July 7, 2024 No Comments

A: The trading of options has become increasingly popular among retail investors as they become aware of the different ways that options can be used to generate profits. The interesting thing about option strategies is that investors can use them in all types of market

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