A single, gaudy, neon-drenched casino is a vega. The plural, of course, (a bunch of them together) is known as "Vegas."
Actually, the term “vega” has to do with options pricing. It belongs to a group of measures known as “the Greeks,” so named because each one gets represented by a Greek letter. Collectively, they describe the way option prices move in relation to various other measures.
Vega specifically relates to implied volatility. It measures the amount an option’s price moves in relation to the implied volatility of the option’s underlying asset. A vega of 1.0 means that an option’s price will move $1 when implied volatility moves 1%.
Vega can be positive or negative. Long options have a positive value (so, if you buy a call, you'll experience positive vega). Meanwhile, short options (like selling a call) have negative vega. The amount of time remaining until expiration also impacts vega. The measure will turn negative as expiration approaches.
Example:
You want to buy a call option for 100 shares of GOOG. The call is priced at $2 and implied volatility is sitting at 35%. The option has a vega of 0.30, meaning that a 1% move in volatility will push the price higher by $0.30. So an increase to 36% implied volatility means the GOOG call price would rise to $2.30.
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Finance: What is a Derivative?23 Views
finance a la shmoop what is a derivative? well it's derived it's a something taken
from something else like a derivative of hot weather is thirst a derivative of [Girl takes sip of glass of water on a beach]
hunger is well you know crankiness that's diva thing you get there...
derivative of a 1/32 quarterback rating in the NFL is like serious wealth yeah
yeah discount double shmoop yeah look for it be on there with aaron
and a derivative of a stock or bond or other security is a something which
derives its value based on the performance of that underlying security
there are basically two flavors of derivative put options ie the right to [Ice cream flavors appear]
sell a security at a given price over a given time period and a call option, ie
right to buy a security at a given price over a given time period
well the price of that option is derived from the price of the security and a few
other factors like strike prices and duration and all that stuff
colonel electric the downgraded new version of General Electric is trading [Colonel Electric appears in a suit]
for 25 bucks a share a derivative of its share price is sold in the form of a
call option with a $30 strike price expiring about 90 days from now on the
third Friday of the end of that month well investors pay a price albeit
probably a small one for the right to then pay 30 bucks a share for colonel [Call option appears for colonel electric]
electric at any time in the next 90 ish days until that option expires making the bet
that the stock will go well above 30 bucks a share in that time period that
call option is thus a derivative of the colonel electric primary stock price got
it if you really want to get personal well here's the ultimate form of
derivative [Baby laying down]
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