Omega


Omega represents a leveraging effect. The omega indicates the percentage by which the price of a warrant would change if the underlying rose or fell by 1 percent. It is calculated by multiplying the leverage factor by delta. A warrant with a leverage factor of 10 and a delta
of 0.5 has an omega of 5. The price of this warrant therefore moves by around 5 percent if the underlying moves by 1 percent.


Option


An option (from Latin: optio = choice) gives the owner the right, but not the obligation, to buy or sell a certain quantity of an underlying instrument from the option writer at an agreed-upon price within a certain period of time. The option contract specifies the price and amount of goods offered. Call options convey the right to buy the instrument at a certain price. Put options convey the right to sell a specific instrument at a pre-agreed price. An option becomes worthless if it is not exercised by the last trading day.


Out of the money


Out of the money (OTM) describes the intrinsic value of an option, i. e. the amount that can be realised by exercising an option right. In the case of a call option, the strike is greater than the current price of the underlying. In the case of a put option, the strike is lower than the current price of the underlying. Compared to a direct transaction on the spot market, a loss would be realised when exercising an option that is out of the money. This is because the option has no intrinsic value.


Over the counter


Over the counter (OTC) means off-exchange trading. In contrast to exchange trading there are no fixed trading hours. Trading usually takes place internationally via trading screens, telephone systems and the Internet. The price of a security is negotiated between banks and securities or investment firms and institutional or private investors. The transactions are subject to the applicable statutory provisions for securities trading.

 

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