The Cboe Nasdaq Volatility Index (VXN) is a real-time market index reflecting the market’s expectations of the volatility of the Nasdaq 100 over the next 30 days.
The VXN was created as a counterpart to the VIX, which measures the volatility of the S&P 500 as the high-tech Nasdaq often diverges from the broader market.
VXN, like VIX, is calculated using the implied volatility of options listed in the Nasdaq 100 Index and works best as a “fear meter” or indicator of the market’s nervousness about the tech sector.
A horizontal spread is a simultaneous long and short position in derivatives for the same underlying asset and strike price, but with different expiration dates.
Boundary conditions were used to establish the minimum and maximum possible values of call and put options prior to the introduction of binomial tree and Black-Scholes pricing models.
Deep-in-the-money options have strike prices that are significantly above or below the market price of the underlying asset and thus contain mostly intrinsic value.
Delta hedging is an options strategy that aims to be directional neutral by establishing compensating long and short positions in the same underlying asset.
The extrinsic value is the difference between the market price of an option, also known as its premium, and its intrinsic price, which is the difference between the strike price of the option and the price of the underlying asset.