Option
A financial derivative that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a specified price at a specified future time.
Timeline (last 90 days)
Risk-transfer instruments are standard equipment in mature commodity markets, mainly forward contracts, futures and options.
The breakeven point equals the strike price plus or minus the net premium, using addition for bullish strategies and subtraction for bearish strategies, with multi-leg combinations combining the net premium first before calculating.
In a low-volatility environment, the cost of buying protection is declining, while the risk of volatility-selling strategies is higher, because once low volatility is broken by an event, the rebound can be very swift.
All Facts (3)
Risk-transfer instruments are standard equipment in mature commodity markets, mainly forward contracts, futures and options.
50%UnverifiedThe breakeven point equals the strike price plus or minus the net premium, using addition for bullish strategies and subtraction for bearish strategies, with multi-leg combinations combining the net premium first before calculating.
50%UnverifiedIn a low-volatility environment, the cost of buying protection is declining, while the risk of volatility-selling strategies is higher, because once low volatility is broken by an event, the rebound can be very swift.
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