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Glossary Of Trading
Vanilla Option
A financial instrument in which one party either buys or sells the counterparty the right but not the obligation to buy (a CALL option) or sell (a PUT option) an asset at a predetermined future time (expiry date) for a predetermined “strike” price. The success of the option is determined by the asset’s price at expiration relative to the strike price.
Volatility
The measure of fluctuation in an asset’s value from the mean. Volatility can be historical (over a time period) or implied (momentary). The higher the volatility, the greater the risk but the higher the potential gain or loss.
Volume
The amount of total trades in an asset or market during a specified time period. It is sometimes also applied to a trader’s total investments in open positions over a specified time period.