Forex Terms V



Value at risk. The expected loss from an adverse market movement, with a specified probability over a particular period of time.

Variation (maintenance) margin. Margin paid by the trading party in order to fully cover any unrealized loss. Any trader holding an overnight position with a negative P&L must post it in cash. It must be kept on deposit at all times.

Vega. The sensitivity of the theoretical value of an option to a change in volatility.

Velocity of money. The rate at which money is turning over on an annual basis to facilitate income transactions.

Vertical bear call spread. A compound option strategy of buying two options with a common expiration date; one option is a short call with a lower strike price and the other is a long call with a higher strike price. The seller's maximum profit is limited to the premium paid for the two options. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss consists of the dollar difference between the two strike prices, minus the total premium received.

Vertical bear put spread. A compound option strategy of buying two options with a common expiration date; one option is a long put with a higher strike price and the other is a short put with a lower strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the difference between the higher strike price and the total premium. The maximum loss is limited to the premium paid for the two options.

Vertical bear spread. An option combination whose theoretical value will decline to a predetermined maximum profit if the price of the underlying currency declines and whose maximum loss is also predetermined.

Vertical bull call spread. A compound option strategy of buying two options with a common expiration date; one option is a long call with a lower strike price and the other is a short call with a higher strike price. The buyer's maximum profit consists of the dollar difference between the two strike prices, minus the total premium paid. The break-even point is calculated as the sum of the lower strike price and the total premium. The maximum loss is limited to the premium paid for the two options.

Vertical bull put spread. A compound option strategy of buying two options with a common expiration date; one option is a long put with a lower strike price and the other is a short put with a higher strike price. The buyer's maximum profit consists of the net premium paid for the two options (one paid, the other received). The break-even point is calculated as the difference between the higher strike price and the total premium received. The maximum loss is limited to the dollar difference between the two strike prices, minus the total premium received.

Vertical bull spread. An option combination whose theoretical value will rise to a predetermined maximum profit if the price of underlying currency rises, and whose maximum loss is also predetermined.

Vertical spread. A compound option that consists of two similar options (i.e., calls or puts), one being bought and the other sold, on the same currency and with the same expiration date, but with different strike prices.

V-formation (spike). Reversal formation that shows sudden trend changes and is accompanied by heavy trading volume. This pattern may include a key reversal day, or an island reversal and an exhaustion gap.

Volatility. The degree to which the price of currency tends to fluctuate within a certain period of time.

Volume. The total amount of currency traded within a period of time, usually one day.

Vostro account. A vostro account from the point of view of the counterparty.

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