Upside The potential for prices to move up. Back to top Variable Delta A delta that can change due to the change of an underlying asset or a change in time expiration of an option. The amount by which the price of an option changes when the volatility changes. Also referred to as volatility. Volatility A measure of the amount by which an underlying is expected to fluctuate in a given period of time.
Volatility is a primary determinant in the valuation of options premiums and time value.
Historical volatility is calculated by using the standard deviation of underlying asset price changes from close to close trading going back 21 to 23 days. Volatility skew measures and accounts for the limitation found in most options pricing models and uses it to give the trader an edge in estimating an option s worth. The amount of shares bought and sold on a stock exchange. Back to top Whipsaw Losing money on both sides of a price swing. Wide Opening Refers to an unusually large spread between the bid and asked prices.