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Moneyness: Difference between revisions
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“[[Moneyness]]” is a measure of how well a bargain you struck is working out, right now. If it was a good investment, you’re [[in the money]]. If it wasn’t, you’re [[out of the money]]. | {{g}}“[[Moneyness]]” is a measure of how well a bargain you struck is working out, right now. If it was a good investment, you’re [[in the money]]. If it wasn’t, you’re [[out of the money]]. | ||
The cleanest examples hail from the world of betting (also known, for those in the three-piece suits, as [[derivatives]]). | The cleanest examples hail from the world of betting (also known, for those in the three-piece suits, as [[derivatives]]). | ||
If you bet your buddy £100 that England would beat Germany in a football match, there are three minutes left of injury time England are trailing 6-0, you are badly [[out-of-the-money]]. You haven’t ''exactly'' lost the bet — not ''yet''<ref>Technically, there is still some [[time value]] to your [[option]].</ref> — but if you wanted to call off the bet, your chum would be asking “well, what’s it worth to you, old fellow? | If you bet your buddy £100 that England would beat Germany in a football match, there are three minutes left of injury time England are trailing 6-0, you are badly [[out-of-the-money]]. You haven’t ''exactly'' lost the bet — not ''yet''<ref>Technically, there is still some [[time value]] to your [[option]].</ref> — but if you wanted to call off the bet, your chum would be asking “well, what’s it worth to you, old fellow? You are [[short an option]]. | ||
By contrast, your compadre is [[in-the-money]] by a similar amount. All the more galling because, when you started, you were both [[at-the-money]]. But, really, what were you thinking? | By contrast, your compadre is [[in-the-money]] by a similar amount. All the more galling because, when you started, you were both [[at-the-money]]. But, really, what were you thinking, expecting England to beat Germany? Do you know ''nothing'' about football? | ||
''[[Incipit tragœdia]]''. | |||
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