You asked what option-related jargon I learned recently. Here are some
(“vol” and “volatility” intermixed)
greeks of common spread portfolios like straddle, strangle, condor, butterfly… ?
synthetic put, synthetic call, synthetic long/short underlier. WHY would traders prefer the synthetic forms to the simpler forms?
variance swap? Why is it so popular?
how does dividend announcement affect options
how do people forecast dividends many years into the future?
How is libor curve affect option pricing
forward curve bootstrapping
forward price and how is it estimated
ex-dividend day and how it affects option exercise
repo curve used in option pricing?
dividend blending in forward curve bootstrap?
volatility skew — why
volatility smile — why
How is fat tail related to skew/smile
higher moments of the price distribution function
VIX – most important index on options
typical values of VIX values
typical values of stock volatility values
arctan surface – for what underliers
taylor surface – for what underliers
What is the expected daily price relative for a stock with expected volatility of 20%
vol of ETF, indices and single stocks
vol of currency pairs
vol of interest rates
what applications do option traders need
what market data do option traders need
How up-to-date and live do option traders need their market data to be
How are vol surfaces calibrated, finalized and published
What types of users rely on vol surfaces and why
Greeks represent exposures. Which exposures do traders want to avoid by hedging, and which ones they don’t want to avoid
among ATM / ITM / OTM what type of options are most popular and why
log-normal distribution vs normal distribution
How do traders price OTC options from listed option prices
What risks do long-term option contracts create and how to reduce those risks
how many underliers have listed options
wings of the volatility surface
Basic techniques to remove outliers during volatility fitting
cost of vol fitting
basic steps to fit an entire surface from a bunch of option quotes on different expirations and different strikes
precisely when would an option holder want to exercise an option?
assignment process upon option exercise
typical values of delta for ATM options, OTM and ITM options
when would delta exceed 1
Basically, how is historical vol measured
Can you compare implied vol against historical vol