C A P S T E M

Glossary

Financial jargons simplified and made easy for better understanding
Calendar/Diagonal spreads are option strategies that are spread across different expiry and maturity. In this, you have a long and short position across different legs and they usually are hedged and carry lower margin requirements.
Delta neutral trades means the strategies are not affected by big moves in the market as the different legs/positions in the strategy hedge and offset other positions.
Drawdown is the reduction of one’s capital after a series of losing trades. This is normally calculated by getting the difference between a relative peak/high in capital minus a relative trough/low of the net equity curve.
Hurdle rate is dependent on the risk-free rate and is linked to the repo rate of RBI and are subject to change based on the rate cycle.
Implied Volatility (IV) measures the extent the stock can move over the next year in a 1SD (Standard Deviation) move. The higher IV implies higher the range and probability of a price far away being possible in near future.
Margin trading is a way of trading by availing funds by pledging existing assets with a broker/lender. Margin accounts allow traders to access greater sums of capital, allowing them to leverage their positions.
Slippage refers to the difference between the expected price of a trade and the price at which the trade is executed. This happens due to many factors like prevailing volatility, liquidity or news events.
Markets have regimes and they oscillate between low and high volatility periods. Whenever there is a regime change and market oscillate, there is either Explosion/Increase or Decay/Crush of Volatility.

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