Questions tagged [derivatives]

This tag is to be used for any question on derivatives. It should typically be used in conjuction with the actual instrument being used like futures, options, swaps, etc.

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34 views

Are there any trading products which track inflation?

Are there any derivative trading products that track inflation very well? I was thinking for example that there would be something like consumer price index derivatives. Or maybe derivatives for some ...
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1answer
58 views

What is Derivative trading and why stock buying selling is not derivative

In finance, a derivative is a contract that derives its value from the performance of an underlying entity. This underlying entity can be an asset, index, or interest rate. By this definition stocks ...
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1answer
100 views

What happened if I don't buy back the profitable put option I sold two weeks ago?

Let's say I sold a TSLA put for 2$. If the underlying price moves up, I can buy it back when reaching 50% percent and collect 100$. What happened if the price moves up and I don't buy it back, do I ...
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50 views

Futures Calendar Spread Quote Convention

Hoping to get this question answered on SExch so I don't have to ask someone on the Desk and betray my ignorance. Trading a Calendar Spread in equity derivatives involves selling/buying the near/far ...
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2answers
70 views

Is It easy to buy back a put-option on its expiry date?

Say I sold a BABA put expiring 5/24 . The usual advise is to close at 50% profit. What If I leave my position open until the expiry date. The put option will be expiring with no value for the other ...
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72 views

Do options contracts give you cash or the underlying?

Whenever I read about options valuation, it's phrased in terms of payoff diagrams. For European options, the value at expiry is the difference between the strike and the market price of the underlying ...
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3answers
132 views

Size of market for physically delivered futures

I understand the difference between cash settled and physically setted futures contracts. I also know that most physically settled contracts end up not being exercised and are closed before expiration....
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2answers
194 views

Can selling naked calls create counterfeit shares?

I understand that illegal naked shorting can lead to FTDs since same share can be loaned out and shorted multiple times. This can lead to a situation where >100% of a stock's float is shorted (Ref: ...
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1answer
94 views

Why are Short Put option strategy losses said to be unlimited when they are limited by fact that stocks don't fall below zero?

This is really more a question about terminology. In many articles describing synthetic long stock options strategy, losses (on the Short Put leg of the trade) are noted as being "unlimited"....
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3answers
105 views

Does exercising an option move the price?

This is a follow up question to this one. Summary: There are deep in-the-money puts at strikes of $800 being traded for an instrument whose price is much below that (in the ballpark of $225 at the ...
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5k views

Deep in the money put options

I'm trying to make sense of this option: Type: put Expiry: 2021-02-05 (= this week's Friday) Bid: 580.4 Ask: 584.9 Contract size: 100 Strike: 800 The underlying's last price is $225. Buying this put ...
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1answer
174 views

Please explain this put option

Earlier today, I purchased 2 put options on GME. The opening price was around $295. The price dropped $30 in 45 minutes to below $265. Why am I not making any money? I looked at all of the put option ...
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99 views

Are there any major advantages of selling put options with a longer expiry date?

If I wish to sell put options to collect the premium, are there advantages of setting a time to expiry of 56 days as opposed to 30 days? Does this lower the risk? Here I am considering American style ...
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45 views

How do we trade and earn profits in future contracts? [closed]

Suppose there is a future contract with a market price of $100 and its lot size is 50, so can I purchase the lot at $100? And while selling before expiry or in intraday, suppose the price is $150, so ...
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2answers
115 views

Options : low IV = selling, high IV = buying?

Trying to make sense of the following sentences found in an article High volume and low volatility indicates that option contracts are being sold. High volume and high volatility indicates option ...
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1answer
132 views

Is the market maker for a particular stock also the market maker for that stock's options?

Is the market maker for a particular stock also the market maker for that stock's options? ... or is it a different person entirely that makes the options markets for that stock? If it's 2 different ...
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1answer
38 views

Vanilla options on major US equity indexes – what is the best way to buy them via individual brokerage account?

Please help me with two questions: What is the best way to buy plain vanilla options on US large, mid, and small cap indexes, such as Russell. I’m looking for some actively tradeable options with ...
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49 views

Return on a futures contract

If Sam invests $200000 on Futures and takes Futures short position on an index fund whose settlement is one year from now, with the current futures price being $1200. The relation between spot price(S)...
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1answer
58 views

What Strategy are these option writers following?

This is the option chain from NIFTY Index about a month from expiry. Apart from speculation what strategy could these option writers be following by writing in the money calls at 10000 or puts at ...
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0answers
632 views

Do I get a second chance if I fail the SGX quiz?

To trade Specified Investment Products (SIPs) such futures, options and structured warrants, I need to pass the SGX quiz. What happens if I fail the quiz? Will I get a second chance? What is the ...
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1answer
107 views

Carry trading using forward contracts

I am curious as to how someone performs a carry trade using forward contracts. I've read that you go long on the currency that has the higher interest rate but this confuses me. In particular, I've ...
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3answers
199 views

How do derivative prices react so quickly to changes in underlying prices?

Just trying to understand something with the market pricing and how it works. There are literally thousands, if not millions of derivatives tied to say an index fund (which in turn are composed of a ...
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1answer
272 views

How can I gamble in a "lottery" by using financial instruments?

I noticed that some financial instruments have lottery-like payoffs. If that is really the case, I am planning to play the "lottery" using financial instruments instead of the lotteries ...
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2answers
5k views

How do I bet that a stock price will not move?

If I believe a stock will go up, I buy the stock. If I believe a stock will go down, I short the stock. If I believe a stock will neither go up nor down, what do I do? How do I profit from a non-...
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1answer
421 views

What are prepaid warrants used for?

I understand the how regular warrants (i.e. non-prepaid warrants) work, and what they could be used for. However, I don't understand what prepaid warrants are used for. Suppose a company issues a ...
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1answer
36 views

Price of a share's futures [duplicate]

Is the price of a share's future contract in the secondary market dependent on supply demand of the share in the secondary market or is it also influenced by the supply demand of the future's contract ...
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1answer
79 views

Who are allowed to take short positions in WTI CRUDE Oil futures?

Can any individual like me take short position?
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1answer
52 views

What financial intrument pays out a fixed amount when a strike price is reached?

What is the name of the financial instrument that pays out a fixed amount when a strike price has been reached? For example, the contract may stipulate that I get paid exactly $100 when the S&P ...
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1answer
71 views

Do compound options trade on exchanges or do they only trade over-the-counter?

Do options on options (i.e. compound options) trade on derivatives exchanges? Or are they only traded over-the-counter? If they do trade on exchanges, which exchanges do they trade on?
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56 views

Short put options (derivatives)

Can anyone solve this question?? "An options trader is short put options on a stock. Explain the directional market risk to this position and how could the trader hedge themselves in the underlying if ...
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3answers
936 views

What, exactly, are the "S&P 500 index swaps" held by UPRO?

I've thought about investing in UPRO, the ProShares UltraPro S&P500 3x leveraged ETF. But, of course, I don't want to invest in it until I have a good understanding of it, including its historical ...
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1answer
335 views

negative delta for bull put spread

I am working on bull put spread. Currently the spot is way below both the strike prices. So one strike is deep in the money and other is in the money. Net position delta retrieved from Bloomberg for ...
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2answers
2k views

Who is on the buy-side of a sell-to-close call options trade?

While I think I understand the mechanics of opening a call position, I am confused about the mechanics of closing a call option prior to expiry. I am party A. Buy-to-open: Party A (buy-side) is ...
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1answer
62 views

What does it exactly mean by saying "buy/sell a futures contract"?

If I buy a crude oil futures contract at $20/barrel and sell it later at $10/barrel, I seem to buy/sell two different contracts. First, the entities of the contract change from me and exchange to ...
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160 views

What is the real cost for storing a barrel of crude oil at present?

The recent negative price of WTI crude oil futures contract indicates the receipt/storage of a barrel of crude oil can cost more than $37, which is unbelievable. Does anybody know the real cost at ...
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1answer
108 views

What is the price of commodity at delivery day for a futures contract?

If I hold a futures contract till the delivery day, what price should I pay for the commodity delivered to me, the price of the futures contract when I bought it, the price of the last transaction at ...
2
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1answer
56 views

Usual procedure when options/futures/forwards expire?

What is the most common procedure when options/futures/forwards are held until expiry? Will the underlying asset be delivered in a physical way or will the value of the derivative be exchanged as a ...
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3answers
10k views

What happens if I do not honor a futures contract?

I have little knowledge about futures contracts. The recent negative price of crude oil spurred my curiosity about this stuff. I read this post about buying/selling futures contracts. According to ...
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1answer
396 views

Could an individual make money off of oil futures? [duplicate]

There was another post about this but oil is going for -32 dollars a barrel. What if I acquired A million barrels of oil. I’d be sitting on 32 million with which I could theoretically use to buy an ...
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1answer
90 views

Who is your counterparty when longing / shorting on leverage?

I understand the basic cases of how longing/shorting works and how two parties with opposing price predictions can make a derivative contract to settle in cash when the price of an asset goes up or ...
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2answers
129 views

What do the d's in this financial derivatives equation mean?

In my financial derivatives class, I am confused by the meaning of the d's in the following equation. Are they derivatives? What are they? dLt = mdt + σdBt Where L = log(St), log return
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179 views

How might ETFs accelerate a "crash" [closed]

I am editing my question to pose the inquiries first in order to hopefully emphasize their objective, rather than subjective nature upfront. Here is my question: Am I correctly understanding the ...
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2answers
490 views

Protection against put-options writers bankruptcy

It's possible to hedge portfolio against the crisis by buying put-options. One thing that worrying me - what if insurers will be bankrupt when you need them the most. This crisis insurance (put-...
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0answers
53 views

Do banks need a foreign branch to access a derivatives market (e.g.) London

I would be very interested to know whether banks (e.g. Santander, Deutsche Bank, etc.) need a foreign branch in a country (e.g. UK - London) to access the derivatives market in this country. Would ...
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1answer
141 views

Understanding the notion of future options

I am currently studying different types of option-related derivatives and I am quite confused about the notion of “futures options”. My textbook says that A futures option is the right, but not ...
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3answers
135 views

Are there investable securities that grow nonlinearly/exponentially with the underlying asset?

Let's say I'm a commodities trader, and Jesus Christ himself has just told me that gold is about to become much, much more valuable. We'll leave the debate on whether that's insider trading to another ...
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2answers
791 views

Do physical ETFs possess the same problems as CDOs?

Today Michael Burry explained to Bloomberg that ETFs are comparible to subprime CDOs, in that investors are buying securities that aren't backed by any real value: Passive investing has removed ...
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1answer
54 views

How to create a derivative fixed rate loan?

Just curious. Someone mentioned he can only find variable rate loans, no fixed-rate option (somewhere in Europe). Which I find strange, there has to be some price that makes such an offering viable. ...
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1answer
103 views

Missing Open,High,Low,Close CME Crude Oil

I have been working on the crude oil futures data and have a couple of questions. There are contracts in which the open,high are empty but the low,close price is available. And in some cases none of ...
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1answer
61 views

Non-delivery of forward contract

What options there are for protection of non-delivery or non-payment for deliverable forward contracts in the absence of clearing house? With volatile assets the spot price can be very different from ...