Yoga position? Berlin-based EDM collective? Nope. It's a weirdly shaped yield curve (a phrase that, on its own, could make a good name for a Berlin-based EDM collective...we'd get up and dance for Weirdly Shaped Yield Curve).
A yield curve tracks the rates paid for various bonds based on maturities. Normally, longer-term bonds pay higher rates than shorter-term ones. In other words, you're going to get paid a higher rate to own a 30-year bond than a 2-year bond.
A positive butterfly is an unusual situation where both short-term rates and long-term rates increase faster than medium-term rates. So the two ends of the yield curve move up, but the middle lags behind. (The ends make up the wings of the butterfly; the middle represents the body).
A negative butterfly represents the opposite situation: short-term and long-term rates drop in relation to medium-term rates. Both the positive and negative butterflies are considered non-parallel yield curve shifts. The name comes from the fact that the changes don't manifest evenly across the yield curve.
Related or Semi-related Video
Finance: What Is a Call Option?25 Views
finance a la shmoop. what is a call option? option? option, where are you? okay
yeah yeah. not phone options, call options. and a close but no cigar. a call option [man smokes in a tub of cash]
is the right to call or buy a security. the concept is easy the math is hard.
you think Coca Cola's poised for a breakout as they go into the new low
calorie beverage business. their stock is at 50 bucks a share and you can buy a [man stands on a stage as crowd cheers]
call option for $1. well that call option buys you the right
to then buy coke stock at 55 bucks a share anytime you want in the next
hundred and 20 days. so let's say Coke announces its new sugarless drink flavor
zero it's two weeks later and the stock skyrockets to fifty eight dollars a
share. you've already paid the dollar for the option now you have to exercise it. [man lifts weights]
so you buy the stock and you're all in now for fifty five dollars plus one or
fifty six bucks a share and your total value is now fifty eight bucks. well you
could turn around today and sell the bundle that moment, and you'll have
turned your dollar into two dollars of profit really fast. and obviously had the [equation on screen]
stock not skyrocketed so quickly well you would have lost everything. still you
lucked out and now you're sitting on some serious cash, courtesy of your call [two men in a tub of cash]
options. as for Coke flavor zero turned out to be nothing more than canned water.
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