Search results
Results from the WOW.Com Content Network
With regard to futures contracts as well as other financial instruments, slippage is the difference between where the computer signaled the entry and exit for a trade and where actual clients, with actual money, entered and exited the market using the computer's signals. [1] Market impact, liquidity, and frictional costs may also contribute.
In finance, a spread option is a type of option where the payoff is based on the difference in price between two underlying assets. For example, the two assets could be crude oil and heating oil; trading such an option might be of interest to oil refineries, whose profits are a function of the difference between these two prices.
Brokerage firms specialize in developing algorithmic strategies, and providing them to the institutional investment community, that aid in the quest to minimise slippage from benchmarks such as implementation shortfall, volume-weighted average price or time-weighted average price.
The spark spread between natural gas and electricity, for gas-fired power stations; The crush spread between soybeans and one of its byproducts, reflecting the premium inherent in processing soybeans into soy meal and soy oil; Highly correlated instruments such as Brent Crude vs WTI Crude or London White Sugar vs New York Sugar.
A ladder can be seen as a modification of a bull spread or a bear spread with an additional option: for instance, a bear call ladder is equivalent to a bear call spread with an additional long call. A bull put ladder is equivalent to a bull put spread with an additional long put.
"Spread is defined as an extension of a cohesive soil or rock mass combined with a general subsidence of the fractured mass of cohesive material into softer underlying material." (Varnes, 1996). "In spread, the dominant mode of movement is lateral extension accommodated by shear or tensile fractures" (Varnes, 1978)
The "straight" ratio-spread describes this strategy if the trader buys and writes (sells) options having the same expiration. If, instead, the trader executes this strategy by buying options having expiration in one month but writing (selling) options having expiration in a different month, this is known as a ratio-diagonal trade.
The bid–ask spread (also bid–offer or bid/ask and buy/sell in the case of a market maker) is the difference between the prices quoted (either by a single market maker or in a limit order book) for an immediate sale and an immediate purchase for stocks, futures contracts, options, or currency pairs in some auction scenario.