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Trends & Analysis
News

TJX announces strong sales, dividend hike

News

Who wins the S&P 500’s bank battle?

News

USD/JPY edges lower on economic data

News

Li Auto shares race ahead on upbeat earnings

News

Can anything stop NVIDIA?

News

Gold rises on soft dollar, geopolitical concerns

Epsilon definition

In options trading, epsilon refers to the elasticity of an option’s value, or how prone to small price changes in the underlying asset a contract is. It is represented by the symbol ε. It is part of a set of mathematical measures that investors use in options trading, alongside delta, gamma, and vega. It can be used to help investors understand how an option’s price will change when there are small movements in financial markets.

 

What are the Greeks in options trading?

The Greeks are mathematical measurements that investors use when trading options. These measurements allow investors to estimate the risk and potential reward of each options contract. Epsilon is a ‘minor Greek’ alongside rho, lambda, and theta. The ‘major Greeks’ in options trading are delta, gamma, and vega.

 

What does epsilon tell options traders?

Epsilon helps options traders assess how sensitive an option contract’s delta, which is how sensitive it is to price volatilities in its underlying asset. It is not a commonly used measure when trading options compared to delta. Nevertheless, it can be useful for investors looking to manage their risk and exposure to changes in price volatility.

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ADSS offers a range of global markets for traders, with opportunities in indices, commodities, forex, equities and more. We also feature tutorials, how-to guides, and weekly webinars to help you navigate the financial markets and find better trading opportunities. You can start trading and investing online by opening a live trading or demo trading account.

 

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Investing in CFDs involves a high degree of risk that you will lose your money due to the use of leverage, particularly in fast moving markets, where a relatively small movement in the price can lead to a proportionately larger movement in the value of your investment. This can result in loses that exceed the funds in your account. You should consider whether you understand how CFDs work and you should seek independent advice if necessary.

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