Vega K (also known as Kappa or Lambda)
Remember from Chapter 1, "Introductions to Options," that there are seven factors that influence an option's price:
- The type of option (call or put)
- The price of the underlying asset
- The exercise price (or strike price) of the option
- The expiration date
- Volatility—Implied and Historical
- Risk-free interest rate
- Dividends and stock splits.
Memory Tip
Vega starts with a V and stands for Volatility.
When you trade stocks, you must be aware of volatility. Volatility is a measure of how a security's price is moving. Volatility is recognized as a measure of risk. If a stock price fluctuates all over the place in wild swings, then you'd find it uncomfortable because you wouldn't have a clue what it was going ...
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