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Derivatives & Options terms
Options flow, implied volatility, futures positioning and the VIX.
Black-Scholes model A mathematical model for pricing European-style options from the underlying's price, volatility, and time to expiry. Contango and backwardation The two shapes a futures curve can take, contango slopes upward with time to delivery, backwardation slopes downward. Crack spread The price gap between crude oil futures and refined product futures like gasoline, used to gauge refining profit margins. Forward points The difference between a currency's spot and forward exchange rate, driven by the interest rate gap between the two currencies. Futures curve The set of prices for futures contracts on the same underlying asset across different expiration dates, plotted together. Implied volatility (IV) The volatility level that, plugged into an options pricing model, reproduces the option's current market price. Option Greeks A set of measures showing how an option's price responds to changes in the underlying, volatility, time, and rates.