DEFINITION of 'Ultima'

The rate at which the vomma of an option will react to volatility in the underlying market. It is the third order derivative of the option value with respect to volatility, or the derivative of vomma with respect to the derivative of volatility.
Ultima is part of the group of measures known as the "Greeks" (other measures include delta, gamma and vega) which are used in options pricing.

BREAKING DOWN 'Ultima'

Ultima is useful to investors who are making options trades and take the vomma and vega into consideration, especially when implementing exotic options which may change format over the period of maturity. This metric is one of the inputs utilized in the Black-Scholes model.




RELATED TERMS
  1. Vega

    The measurement of an option's sensitivity to changes in the ...
  2. Speed

    The rate at which the gamma of an option or warrant will change ...
  3. Greeks

    Dimensions of risk involved in taking a position in an option ...
  4. Theta

    A measure of the rate of decline in the value of an option due ...
  5. Underlying Asset

    A term used in derivatives trading, such as with options. A derivative ...
  6. Gamma Pricing Model

    An equation for determining the fair market value of a European-style ...
Related Articles
  1. Trading

    The Anatomy of Options

    Find out how you can use the "Greeks" to guide your options trading strategy and help balance your portfolio.
  2. Trading

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  3. Trading

    Stock Options: What's Price Got To Do With It?

    A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price.
  4. Trading

    Option Volatility

    Knowing how the market works in relation to volatility can open a whole new world of opportunity.
RELATED FAQS
  1. What Does It Mean to Be Long or Short a Derivative?

    Find out more about derivative securities and what it indicates when traders or investors establish a long or short position ... Read Answer >>
  2. What is the difference between derivatives and options?

    A derivative is a financial contract that gets its value from an underlying asset. Options offer one type of common derivative. Read Answer >>
  3. What does the underlying of a derivative refer to?

    Find out more about derivative securities, what an underlying asset is and what the underlying assets refer to in stock options ... Read Answer >>
  4. How big is the derivatives market?

    Examine the potential size of the total derivatives market, and learn how different calculations can reduce the estimate ... Read Answer >>
  5. What is the relationship between implied volatility and the volatility skew?

    Learn what the relationship is between implied volatility and the volatility skew, and see how implied volatility impacts ... Read Answer >>
  6. What does it mean to roll a derivative contract?

    Find out more about derivative securities, how to roll forward a derivative contract and what it means when a derivative ... Read Answer >>
Hot Definitions
  1. Capital Asset Pricing Model - CAPM

    Capital Asset Pricing Model (CAPM) is a model that describes the relationship between risk and expected return and that is ...
  2. Return On Equity - ROE

    The profitability returned in direct relation to shareholders' investments is called the return on equity.
  3. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  4. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  5. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  6. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
Trading Center