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Ultima

What is '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.

Explaining '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.





Further Reading




Q&A About Ultima


Where does Ultima come into play when investors are making options trades?

It comes into play when investors are implementing exotic options.

What is Ultima?

The rate at which the vomma of an option will react to volatility in the underlying market.

How is this metric used in the Black-Scholes model?

This metric is one of the inputs utilized in the Black-Scholes model.

What does it mean if a trader has a high value for Ultima?

A high value for Ultima means that he or she has a higher probability of profiting from his or her investment.

What does it mean if a trader has a low value for Ultima?

A low value for Ultima means that he or she has less probability of profiting from his or her investment.