Philip M
Halperin - Scribblings
Definitions for Options Trading
FUNDAMENTAL ANALYSIS
A Method by which the
practitioner can, after much study, predict the impact of news
the market has already discounted in its pricing.
ECONOMETRIC FORECASTING
MODEL
A Learned System for
predicting the immediate past.
GARCH
An acronymic Learned System
for predicting the immediate past.
TECHNICAL ANALYSIS
A Learned System for
predicting that what has happened before might happen again.
TECHNICAL ANALYSIS SYSTEM
A Learned System for mindlessly predicting that what has happened before might happen
again.
ARTIFICIAL INTELLIGENCE
A Computerised contradiction in terms.
ARTIFICIAL INTELLIGENCE TECHNICAL ANALYSIS SYSTEM
A System for predicting that what has happened before might happen again, very very
quickly.
SETTLEMENT PRICE
The price at which the option should have traded, since it suited the locals' books.
PUT-CALL PARITY
The opposite of "Settlement Price".
DATA FEED
A system for disseminating typos and misprints at the speed of light.
DELTA NEUTRAL
A mathematical Method for losing money on long options, regardless of which way the market
trades.
DIRECTIONAL TRADING
A Technique to lose money on options volatility.
VOLATILITY TRADING
A Technique to lose money on market direction.
RISK-REWARD RATIO
A Learned Method to compare what you will lose to what you might make, assuming you don't change your position and assuming the market goes your way.
LONG STRADDLE
An options Technique to lose money on both sides of the market through time and
volatility erosion.
LONG DOUBLE
An options Technique to lose money on both sides of the market through time and
volatility erosion on the London Metals Exchange.
POSITION DELTA
A figure you know the day after. Tells you where you might have hedged.
DAY TRADING
A Technique to convert the character of a long option position into the risk of a futures
position, while still losing time premium.
HISTORICAL VOLATILITY
An estimate of how the average ratio of market prices in some underlying actually
differed from some series of ratios of market prices, for some period in the past, often used to estimate what that ratio deviation might be now.
Indispensable for historically pricing options that have already expired.
IMPLIED VOLATILITY
An estimate of the market's best guess as to what historical volatility might ultimately turn
out to be. This is computed on the basis of observed options premiums that are, in turn, based on the market's estimates as to what implied volatility might be now.
VOLATILITY
What market-makers think
their bonus is paid in. As in, "I made two vols on the
trade!"
CORRELATION
The cop of the quantitative world. Never around when you need it.
SUPPORT/RESISTANCE
See "Correlation".
FAST MARKET
An Official Declaration that it is now Legal for floor brokers to do to you what they have been
doing all along.
TRADING PROGRAMS
A method for dissemination of computer viruses.
PROGRAM TRADING
A Technique to buy or sell within nanoseconds after
1) A typo or misprint has been received by your machine.
2) Everybody else.
NUMBER (Usage: Trade Number, Inflation Number, GNP Number)
A macroeconomic figure that
provides the impetus for you to profit from your best guess as to
what the consensus of everybody else's best guess about what the market's best
guess of that same macroeconomic figure might have been, assuming
your guess about the analysts' guess consensus about the market's
guess was correct.
©Copyright 1998
Back
|