Glossary
Darren Krett
Monday 19 December 2022
W-X
WASTING ASSET : An asset that has a limited life and tends to decrease in value over time(all other factors being held constant). Options ar
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REVALUATION: A change in the relationship between the price of an option (or a spread) and its' theoretical value. In other words, a change in the 'edge' of the position. REVERSE CONVERSION: More commonly called a reversal, it is a neutral spread consisting of short actual underlying and long synthetic underlying.
RHO: The sensitivity of the option to a change in interest rates. Normally this is expressed for a one-percent change in interest rates.
RISK: Exposure to uncertainty.
RISK-FREE RATE: A theoretical interest rate at which an investment may earn interest without incurring any risk.
ROLLING OUT: Substituting a call option of the same class and strike price, but with a later expiration.
ROLLING UP: Substituting a call option of the same class and expiration, but with a higher strike price (a lower strike price in the case of puts).
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Darren Krett
Monday 19 December 2022
U-V
UNDERLYING : The security upon which the value of an option depends. Underlying securities can include stock, futures and indexes. UNDERVALU
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