Derivatives

Strangle

Strangle is a delta neutral trading strategy which pays off only with a large movement in the underlying market price. It consists of taking positions in call and put …

Strip and Strap

Strip A strip is delta negative trading strategy. Being delta negative implies that the value of the strip position increases when the price of the underlying security goes down.

Exotic Options

An exotic option is an over the counter (OTC) option which is more complex than commonly traded plain vanilla options in terms of the option behavior with respect to …

Asset Backed Securities

Asset-backed securities (ABS) are debt instruments collateralized by a variety of loans and obligations. These obligations usually include student loans, credit card receivables, auto loans, home equity loans etc. …

Callable Bonds

A normal bond can be issued with embedded options. One such bond is a callable bond. It is like a normal bond but with an embedded call option which …

Warrants

A warrant is a derivative instrument which gives the warrant-holder a right to buy the underlying stock at a pre-determined strike price. A warrant-holder can exercise it to buy the …

Forward Contract

Forward Contracts A forward contract is the easiest form of derivatives. Here, two parties enter into an agreement either to buy or sell something at a future date agreed …