Alan Ellman October 5, Strategies are often used to engineer a particular risk profile to movements in the underlying security. It generally pertains to the result at the expiration date. Generally used in reference to strategies that have two break-even points-an upside. Rather than attempt to solve the differential equations of motion that describe the option's value in relation to the underlying security's price, a Monte Carlo model uses simulation to generate random price paths of the underlying asset, q of which results in a payoff for the option.
Accumulation - When china national day holiday 2016 start moving sideways after a significant drop as investors start accumulating. Adjusted Options - Non-standardized stock options with customized terms in order to price in major changes in the underlying stock's capital structure. Read the full tutorial on. All-or-None AON Order - An order that must be completely filled or else it will.
This is a useful order for option traders executing complex option strategies. Types Of Options Orders Explained. An option contract that may be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American-style. Read The Tutorial What is a put option spread #12 American Style Options. Arbitrage - The simultaneous purchase and sale of financial instruments in order to benefit from price discrepancies. Read more about Options Arbitrage. Ask Price- As used in the phrase 'bid and asked' it is the price at which a.
Another way of saying this is the asking price for. You buy option contracts and stocks on their Ask price. Read more about Options Prices. Assign - to designate an option writer for fulfillment of his obligation to sell. The writer receives an. At the Money - When an option's strike price is the same as the prevailing stock price. At The Money Options. A protection procedure whereby the Options Clearing Corporation attempts to protect the holder of an expiring in-the-money option by automatically exercising the option on behalf of the holder.
A three way agreement to have your options broker automatically execute trade recommended by your options advisory service. Backspread - see Reverse Strategy. Barrier Options - Exotic options which comes into existence or goes out of existence when certain prices has been reached. Read More About Barrier Options Here!
Bearish Options Strategies - Different ways to use options in order profit from a downwards move in the underlying stock. Read the tutorial on Bearish Options Strategies. Bear Spread - an option strategy that makes its maximum profit when the. In either case, an option with a. See also Bull Spread. Bear Trap - Any technically unconfirmed downward move that encourages investors.
It usually precedes strong rallies and often catches what is a put option spread #12 unwary. Beta - A figure that indicates the historical propensity of a stock price to. Bid Price - The price at which a potential buyer is willing to buy from you. This means that you sell at the Bid Price. Binary Options - Options that either pay you a fixed return when it ends up in the money by expiration or nothing at all. Read more about Binary Options. Black-Scholes Model - A mathematical formula designed to price an option as a function of.
Read More About Black-Scholes model. Box Spread - A complex 4 legged options trading strategy meant to take advantage of discrepanies in options prices for a risk-free arbitrage. Learn More About Box Spreads. Break - Even Point-the stock price or prices at which a particular strategy. It generally pertains to the result at the expiration date. A "dynamic" break-even point is one. Breadth - The net number of stocks advancing versus those declining. When the declines exceed. Breakout - What occurs when a stock price or average moves above a previous high.
The odds are that the trend will. Bullish - An opinion in which one expects a rise in price, either by the. Bullish Options Strategies - Different ways to use options in order profit from an upwards move in the underlying stock. Read the tutorial on Bullish Options Strategies. Bull Call Spread - A bullish options strategy which aims to reduce the upfront cost of buying call options in order to profit from stocks that are expected to rise moderately.
Read the Tutorial on Bull Call Spread. Bull Spread - an option strategy that achieves its maximum potential if the. An option with a lower striking price is bought and one with a higher striking. Either puts or calls may be. Bull Trap - Any technically unconfirmed move to the upside that encourages. Usually precedes important declines and often fools those who do. Butterfly Spread - A neutral option strategy that has both limited risk and limited.
The strategy can be established with either puts or calls; there. Learn Everything About The Butterfly Spread. Buy To Open - To establish an options position by going long. Buy To Open tutorial. This is achieved by buying further strike out of the money call options than a regular butterfly spread. Read the tutorial on Call Broken Wing Butterfly Spread. This is achieved by buying further strike out of the money call options than a regular Condor spread.
Read the tutorial on Call Broken Wing Condor Spread. Call Ratio Backspread - A credit options trading strategy with unlimited profit to upside and limited profit to downside through. Read the tutorial on Call Ratio Backspread. Call Ratio Spread - A credit options trading strategy with the ability to profit when a stock goes up, down or sideways through.
Read the tutorial on Call Ratio Spread. Call Time Spread - Another name for Call Calendar Spread. An Options Trading strategy where long term call options are bought and near term call options are written in order to profit from time decay. Read the tutorial on Call Time Spread. Called Away - The process in which a call option writer is obligated to surrender the underlying stock.
Read the tutorial on Called Away. Calendar Spread - A type of options trading strategy that uses a combination of options with different expiration dates in order to profit primarily from time decay. Read all about Calendar Spreads. Calendar Straddle or Combination- A complex neutral options strategy involving the purchase of a long term straddle and the sale of a short term straddle.
Read all about Calendar Straddle. Calendar Strangle - A complex neutral options strategy involving the purchase of a long term strangle and the sale of a short term strangle. Read all about Calendar Strangle. Call Options - Options which gives the holder the right to buy the underlying security. Read All About Call Options. Capitalization - The total amount of securities issued by a corporation.
Cash Secured Put - Short put options that are fully covered by cash needed in the event of an assignment. Read All About Cash Secured Put. Read All About Cash Settled Options. CBOE - The Chicago Board Options Exchange; the first national exchange to trade. Chain - A list of options quotes across multiple strike prices. Class of Options - Option contracts of the same type and style that covers the same underlying asset.
Closing Order - The buying back or selling off of an option for which an option trader has the opposite position. An option trader who writes a call option will execute a closing order by "buying to close" that call option. Condor Spread - A complex neutral option strategy that profits from a stock trading within a predetermined range. Read All About Condor Spreads Here!
Contango - A term originating from the oil market. This is when farther month implied volatility is higher than nearer month implied volatility. This is indicative of a normal market condition. Contingent Order - An advanced customizable options order that triggers contingent upon the fulfillment. Contract Size - The amount of underlying asset covered by the option contract. This is generally Contract Neutral Hedging - A static hedging technique involving buying 1 put option or selling 1 call option.
Read More About Contract Neutral Hedging Here! It is most significant at major market turning points. An overall consensus of. An investor taking a. Conversion - The transformation of a long stock position into a position which is. What is a put option spread #12 more about Conversions. Consolidation - When stocks starts going sideways after a significant rise as investors start selling some of their holdings to take profit.
Contract Range - The highest and lowest price that an options contract has traded at. Find out more about. Covered Call Write - a strategy in which one writes call options while. Read All About Covered Calls Here! Covered Put Write - a strategy in which one sells put options and simultaneously. Learn Everything About The Covered Put. Covered Straddle Write - the term used to describe the strategy in which an.
Covered Warrant - the term used for structured warrants that works almost exactly the same as call options and put options. Money received in an account. A credit transaction is one in which the net sale proceeds are larger than the net buy proceeds costthereby bringing money into the account. There are many credit option strategies. Read All About Debit And Credit Spreads Here! A Credit Spread position is an option spread in which the net sale proceeds are larger than the net buy proceeds costthereby bringing money into the account.
Day Order - An order that expires at the end of the trading day if it is not executed. Read All About Options Orders Here! Read more about Options Trading Styles. An expense, or money paid out from an account. A debit transaction is one in which the net cost is greater than the net sale proceeds. Debit Spread - Option spreads which you have to pay money to put on.
Decay - See Time Decay Deliverables - The financial assets that are delivered to the options holders when options are exercised. Call options have positive deltas. Technically, the delta is an instantaneous measure. Consequently, the terms "up delta" and. For more detailed explanation on Delta and other. Delta Neutral - When positive delta options and negative delta options offset each other to produce a position.
Such a position will return. Perform Delta Neutral Trading. Delta Spread - A ratio spread that is established as a neutral position by. The neutral ratio is determined by dividing. Derivatives - A financial instrument whose value is derived in part from the. Examples of derivatives are options. Diagonal Call Time Spread - A neutral options trading strategy profiting primarily through time decay by buying long term at the money call options and shorting short term out of the money call options against them.
Read the Diagonal Call Time Spread Tutorial. Diagonal Spread - An options spread on the same underlying, same type but different expiration month and strike. Read the Diagonal Spread Tutorial. Discount - An option is trading at a discount if it is trading for less than its. A future is trading at a discount if it is trading at a price less than. See also Intrinsic Value and Parity.
Discount Broker - A brokerage firm that offers low commission rates. Get A List Of Option Brokers Here! Dividend - When a company pays a share of the profit to existing shareholders. This share of profit may be in cash or options. Read about the Effects of Dividends on Stock Options. Downside Protection - Generally used in connection with covered call writing. Alternatively, it may be expressed in terms.
Dynamic Hedging what is a put option spread #12 A hedging technique which requires constantly rebalancing in. Early Exercise assignment - The exercise or assignment of an option contract. Employee Stock Options - Stock options granted to employees by their companies. Read More About Employee Stock Options. ETF - Exchange Traded Funds. Open ended funds tradable over an exchange just like a stock. ETFs made it possible. European Exercise - A feature of an option that stipulates that the option may.
Therefore, there can be no early assignment with this. Read The Tutorial On European Style Options. Exercise - To invoke the right granted under the terms of a listed options. The holder is the one who exercises. Call holders exercise to buy the underlying. Read the tutorial on how to Exercise an Option. Exercise Limit - The limit on the number of contracts which a holder can. Set by the appropriate option exchange, it what is a put option spread #12 designed. Exercise Price - The price at which the option holder may buy or sell the.
It is the price at. For listed options, the exercise price is the. Expected Return - A rather complex mathematical analysis involving statistical. Expiration Date - The day on which an option contract becomes void. All holders of options must indicate their desire to exercise, if they. Read the full tutorial on Options Expiration. Expiration Time - The time of day by which all exercise notices must be received.
Technically, the expiration time is currently PM on the. Expire Worthless - When out of the money options lose all their value and expire. Extrinsic Value - Also known as "Premium Value" or "Time Value". Fair Value - A term used to describe the worth of an option or futures. Fiduciary Call - An option trading stratey which buys call options as a replacement. Read More About Fiduciary Calls Here! Financial Instrument - A physical or electronic document that has intrinsic.
For example, cash, shares, futures, options and precious metals are financial instruments. Frontspreads - Options strategies designed to profit from neutral market conditions where prices change very little. Read more about Frontspreads. Fundamental Analysis - A method of analyzing the prospects of a security by. Gamma - The rate of change of a stock option's delta for one unit change in. Read All About Options Gamma. Gamma Neutral - A position which has zero or near zero gamma value resulting in the delta value of the position staying.
Read All About Gamma Neutral. Goldilock Economy - An economy that has steady growth and moderate inflation which is neither too heated nor cold and allows for. Good Until Canceled GTC - A designation applied to some types of orders. Going Forward - Analyst's Jargon. Meaning "In The Future". Greeks - A set of mathematical criteria involved in the calculation of.
Please read more about Option Greeks. Hedge - Transactions that will protect against loss through a compensatory price movement. Read All About Hedging Here! Hedge Ratio - The mathematical quantity that is equal to the delta of an option. It is useful in facilitation in that a theoretically riskless hedge can be established by. Read All About Hedge Ratio Here!
Historical Volatility - Volatility of past price movement of what is a put option spread #12 underlying asset. Also known as Realised Volatility. Horizontal Call Time Spread - An option strategy in which longer term at the money call options are bought and short term at the money call options are written in order to profit when the underlying stock remains stagnant.
Read the tutorial on Horizontal Call Time Spread. Horizontal Put Time Spread - An option strategy in which longer term at the money put options are bought and short term at the money put options are written in order to profit when the underlying stock remains stagnant. Read the tutorial on Horizontal Put Time Spread. Horizontal Spread - An option strategy in which the options have the same. Implied Volatility - A measure of the volatility of the underlying stock, it is.
Read more about Implied Volatility. Incremental Return Concept - A strategy of covered call writing in which the. Index Option - An option whose underlying asset is an index instead of a hard asset such as stocks. Read the full tutorial on Index Options! In the Money - A term describing any option contract that has intrinsic value. A put option is in-the-money if the security is below the strike price.
In The Money Options here. Intrinsic Value - The value of an option if it were to expire immediately with. For call options, this is the difference between the stock price and the striking price. For put options it is the. Read the full tutorial on Intrinsic Value! Last Trading Day - The third Friday of the expiration month.
Leg - Verb A risk oriented method of establishing a two-sided position. The risk materializes from the fact that a better. Noun In an option strategy involving many kinds of options, each option type is known. Read the full tutorial on Options Leg! Legging - Entering each leg of a complex options trading position seperately and individually. Read the full tutorial on Legging!
LEAPS - Long-Term Equity Anicipation Securities. Simply said, it is option contracts. Sometimes option contracts that expires 6 months. Read more about LEAPs. Level II Quotes - Real time quotes provided by NASDAQ outlining the specific. Read What is a put option spread #12 About Level II Quotes Here. Leverage - In investments, the attainment of greater percentage profit and risk.
A call holder has leverage with respect to a stock holder-the former will have. Read About How To Calculate Options Leverage. Limit Order - An order to buy or sell securities at a specified price the. Read more about Limit Order. Read About What Affects Stock Option Liquidity Here! Listed Option - A put or call option that is traded on a national option. Listed options have fixed striking prices and expiration dates. Long - To be long is to own something. Read more about Long Options Positions.
LookBack Options - Exotic options which allows the holder to "Look Back" at the price action of the underlying asset. Read More About LookBack Options Here! Margin stocks - To buy a security by borrowing funds from a brokerage house. Margin options - Cash deposit needed to be held in account when writing options. Marked-To-Model - A valuation method using financial models for level 2 assets, which are less liquid assets.
Market Maker - An exchange member whose function is to aid in the making of a. Several market-makers are normally assigned to a particular security. Read All About Market Makers Here! Market Order - An order to buy or sell securities at the current market price. Read All About Options Market Order! Market On Close MOC - An option trading order that fills a position at or near. Married Put and Stock - a put and stock are considered to be married if they are.
Read More About Married Puts Here! Mini Index Options - Index options that are only one-tenth the size of regular index options. Read More About Mini Index Options Here! Mini Options - Stock options that covers only 10 shares instead of shares. Read More About Mini Options Here! Model - A mathematical formula designed to price an option as a function of.
The Black-Scholes model is. Moneyness - The strike price of an option in relation to the prevailing price of the underlying asset. Read More About Moneyness Here! Multiple Compression - Where the overall market sell off over a period of time in order to generally reduce PE ratios across the board due to pessimism about the macro economy. Multiple Expansion - Where the overall market rallies over a period of time in order to generally increase PE ratios across the board due to optimism about the macro economy.
NASDAQ - National Association of Securities Dealers Automatic Quotation System. It is an electronic market place in USA where securities are listed and traded electronically. Naked Option - see Uncovered Option. Narrow Based - Generally referring to an index, it indicates that the index is. Near The Money Options - Options with strike prices near to the spot price of the underlying stock. Read the tutorial on Near The Money Options.
Neutral - Describing an opinion that is neither bearish or bullish. Neutral Options Strategies - Different ways to use options in order profit a stock remains stagnant or within a tight trading range. Read the tutorial on Neutral Options Strategies. Non-Equity Option - An option whose underlying entity is not common stock. One Sided Market - A market condition where there are significantly more sellers.
In this case, there are not enough buyers putting. Open Interest - The net total of outstanding open contracts in a particular. An opening transaction increases the open interest, while any closing. Read More About Volume and Open Interest. Option - The right to buy or sell specific securities at a specified price. A put gives the holder the right to sell the stock, a call the.
Options Chains - Tables presenting the various options that a stock offers over various strike price and expiration dates. Read the full tutorial on Options Chains. Options Contracts - Contingent claims contracts that allows its holder to buy or sell a specific asset when exercised. Read the full tutorial on Options Contracts. Options on Futures - Options that have futures contracts as their underlying asset. Read the full tutorial on Options on Futures. Option Pain - Also known as Max Pain or Max Option Pain.
It is the stock price which will result in the most number of options contracts. Read More About Option Pain. Option Pricing Curve - A graphical representation of the projected price of an. It reflects the amount of time value premium in the. The curve is generated by using a mathematical. The delta or hedge ratio is the slope of a tangent line to the curve at a fixed.
Option Trader - Also known as Options Trader. It is anyone who buys and sells options in the capital market. Option Trading - Also known as Options Trading. It is the buying and selling of stock and index options in the capital market so as to. Options Clearing Corporation OCC - The issuer of all listed option contracts. Options Trading - The buying and selling of stock and index options in the capital market so as to. Options Trader - Anyone who buys and sells options in the capital market.
Options Strategist - An investment professional who specializes in research, analysis and execution of options strategies. Options Symbol - A string of alphabets that define specific options contracts. Can be referred to as the name of an options contract. Read more about Reading Options Symbols. Out of the Money - Describing an option that has no intrinsic value. Out Of The Money Options. Over-the-Counter Option OTC - An option traded over-the-counter, as opposed to.
The OTC option has a direct link between buyer and seller, has no. Overvalued - Describing a security trading at a higher price than it logically. Normally associated with the results of option price predictions by mathematical. If an option is trading in the market for a higher price than the model indicates. Parity - Describing an in-the-money option trading for its intrinsic value: that.
Also used as a point of. An option trading under parity is a discount. Physical Option - An option whose underlying security is a physical commodity. The physical commodity itself typically a currency or. Treasury debt issue-underlies that option contract. Physically Settled Option - An option which the actual underlying asset exchange hands when exercised. Read more about Physically Settled Options.
Portfolio - Holdings of securities by an individual or institution. A portfolio may contain options of different stocks or a combination of shares, options and other. Position - Specific securities in an account or strategy. A covered call writing. It also refers to. Position Trading - The use of options trading strategies in order to profit. Premium - The total price of an option contract is made up of the sum of the. The Premium of an option contract is the part of the price that is not intrinsic.
Please read more about Options Premium. Profit Range - The range within which a particular position makes a profit. Generally used in reference to strategies that what is a put option spread #12 two break-even points-an upside. The price range between the two break-even points. Profit Table - A table of results of a particular strategy at some point in. This is usually a tabular compilation of the data drawn on a profit graph. Protected Strategy - A position that has limited risk.
A protected short sale. The Ride The Flow System is what is a put option spread #12 example of a protected strategy. Protective Call - An option trading hedging strategy that protects profits made what is a put option spread #12 a short stock position using call options. Read More About Protective call Here! Protective Put - An option trading hedging strategy that hedges against a drop in stock price using put options.
Read More About Protective Put Here! Public Book of orders - The orders to buy or sell, entered by the public, that. The board broker or specialist keeps the public book. Market-makers on the CBOE can see the highest bid and lowest offer at any time. Pull back - A temporary fall in price after a rally. The rally usually continues.
This is also known as a "Correction". This is achieved by buying further strike out of the money put options than a regular butterfly spread. Read the tutorial on Put Broken Wing Butterfly Spread. This is achieved by buying further strike out of the money put options than a regular put condor spread. Read the tutorial on Put Broken Wing Condor Spread. Put - An option granting the holder the right to sell the underlying security at.
Read About Put Options Here. Put Call Parity - Put Call Parity is an option pricing concept that requires the extrinsic values of call and put options to be in. Put Call Parity is also known as the Law Of One Price. Read About Put Call Parity Here. Put Call Ratio - The ratio of the number of open put options against the number of open call options. The higher the resulting.
For daily total equity put call ratio, please visit. Put Ratio Backspread - A credit options trading strategy with unlimited profit to downside and limited profit to upside through. Put Ratio Spread - A credit options trading strategy with the ability to profit when a stock goes up, down or sideways through. Read the tutorial on Put Ratio Spread. Quadruple Witching - The third Friday of March, June, September and December when Index Futures, Index Options, Stock Futures and.
This is one of the most volatile trading days of the year, with exceptionally high trading volume. Ratio Backspread - Credit volatile options trading strategy that opens up one leg for unlimited profit through selling a smaller amount of in the money options against the purchase of at the money or out of the money options of the same type. Read the Tutorial on. Ratio Calendar Combination - A strategy consisting of a simultaneous position of.
Ratio Calendar Spread - Selling more near-term options than longer-term ones. Ratio Spread - Constructed with either puts or calls, the strategy consists of. Ratio Strategy - A strategy in which one has an unequal number of long. Normally, it implies a preponderance of short options. Ratio Write - Buying stock and selling a preponderance of calls against the. Realize a profit or loss - The act of closing a position, incurring a profit or. As long as a position is not closed, the profit or loss remains unrealized.
Resistance - A term in technical analysis indicating a price area higher than. A ratio of above 1 means that. Read the full tutorial on Calculating Reward Risk Ratio. Return On Investment ROI - The percentage profit that one makes, or might make, on. Return If Exercised - The return that a covered call writer would make if the. Return If Unchanged - The return that an investor would make on a particular.
Reversal - The transformation of a short stock position into a position which is. Read more about reversals and synthetic positions. Reverse Hedge - A strategy in which one sells the underlying stock short and. This is also called a synthetic straddle. Reverse Strategy - A general name that is given to strategies which are the. For example, a ratio spread consists of buying calls. A reverse ratio spread also. The results are obviously directly opposite to each other.
Learn All About Risk Graphs Now! Risk Free Return - Profit on a risk free investment instrument such as the Treasury bills. It is what is a put option spread #12 common. Roll Down - Close out options at one strike and simultaneously open other. Read the tutorial about Roll Down. Roll Forward - Close out options at a near-term expiration date and open options. Read the tutorial about Roll Forward. Rolling - A follow up action in which the strategist closes options currently in.
Roll Up - Close out options at a lower strike and open options at a higher. Read the tutorial about Roll Up. Rotation - A trading procedure on the option exchanges whereby bids and offers. Russell Sage - Renowned American Politician and Financier who introduced OTC call and put options in Sell To Close - Closing a position by selling an option contract you own.
Learn About Sell To Close Now! Sell To Open - Opening a position by selling an option contract to a buyer. Learn About Sell To Open Now! Selling Climax - Exceptionally heavy volume created when panic-stricken. Often this marks the end of a bear market and is a spot to buy. Series - An option contracts on the same underlying stock having the same. Settlement - The resolution of the terms of an options contract between the holder and the writer when the options contract is exercised. Read the full tutorial on Options Settlement.
Short to be short - To Short means to Sell To Open. That means to write or sell an options. This gives you the obligation to fulfill the exercise of the option should the. Read all about Short Options Positions Short Backspread - Volatile options strategies which are set up with a net credit and unlimited profit potential in one direction. Short Calendar Spread - Volatile options strategies that profit primarily through the difference in time decay of long term and short term options, achieved through writing longer term options and buying short term options.
Read the full tutorial on Short Calendar Spreads. Short Horizontal Calendar Call Spread - Short Calendar Spread that uses only call options. Read the full tutorial on Short Horizontal Calendar Call Spreads. Spread - An options position consisting of more than one type of options on a single underlying asset. Spread Order - An order to simultaneously transact two or more option trades. Typically, one option would be bought while another would simultaneously be sold.
The spread order may be either a debit or credit. Spread Strategy - Any option position having both long options and short options. Static Hedging - A hedging technique where a hedging trade is established and. Stock Options - Options contracts with shares as the underlying asset. Read All About Stock Options. Stock Replacement Strategy - A trading strategy that seeks to reduce risk and volatility through owning deep in the money call options. Read All About Stock Replacement Strategy. Stock Repair Strategy - An options strategy that aims to recover lost value in a stock quickly through writing call options against it.
Read All About Stock Repair Strategy. Stop Limit Order - Similar to a stop order, the stop-limit order becomes a limit. Read All About Options Stop Loss Here! Stop Order - A traditional stop loss method which closes a position when a predetermined. Straddle - The purchase or sale of an equal number of puts and calls having the. Strip Straddle - A Straddle with more put options than call options. Strap Straddle - A Straddle with more call options than put options.
Strategy - With respect to. Strike Arbitrage - An options arbitrage strategy that locks in discrepancies in options pricing between strike prices for a risk-free arbitrage. Read More About Strike Arbitrage. Strike Price - The price at which the buyer of a call can purchase the stock. Read More About Strike What is a put option spread #12. Structured Warrants- An alternative to stock options which works almost exactly like stock options and traded in markets such as the. See how Structured Warrants Are Traded In The Singapore Market.
Support - A term in technical analysis indicating a price area lower than the. Thus a stock would stop. Swing Trading - A trading methodology that trades short term price swings for short term profits. Synthetic Put - A security which some brokerage firms offer to their customers. The broker sells stock short and buys a call, while the customer receives the synthetic.
This is not a listed security, but a secondary market is available as long as there. Synthetic Stock - An option strategy that is equivalent to the underlying stock. A long call and a short put is synthetic long stock. A long put and a short call is. Synthetic Short Straddle - A combination of stocks and call options which produces the same payoff characteristics as a Short Straddle.
Read More About Synthetic Short Straddle. Synthetic Straddle - A combination of stocks and call options which produces the same payoff characteristics as a Long Straddle. Read More About Synthetic Straddle. Take Delivery - To fulfill the obligation of buying stocks when put options that. Technical Analysis - The method of predicting future stock price movements based. Thales of Miletus - The creator of options back in BC. Read about the History of Options Trading Theoretical Value - The price of an option, or a spread, as computed by a.
Theta - One of the 5 option greeks. Theta determines the rate of time decay. For more details on how Theta works and how it is calculated. Ticker Symbol - Symbol representing the shares and options of a company's shares traded in the. MSFT is the ticker symbol for Micrsoft shares while MSQFB is the ticker symbol for. Time Decay - The reduction of a stock option's extrinsic value as expiration date draws.
Time Spread - see Calendar Spread. Time Value - Also known as "Premium Value" or "Extrinsic Value". Read more about how. Stock Options Are Priced. Total Return Concept - A covered call writing strategy in which one views the. Trading Limit - The exchange imposed maximum daily price change that a futures. Trend - The direction of a price movement. A trend in motion is assumed to. Triple Witching - Prior to The third Friday of March, June, September, and December, when stock options, index futures and options on index futures.
Afterthe introduction of Single Stock Futures transformed Triple Witching into Quadruple Witching as single stock futures expire on. Uncovered Option - A written option is considered to be uncovered if the. Underlying Asset - The security which one has the right to buy or sell via. An underlying asset can be any financial instrument on which option contracts can. Some examples are : Stocks, ETFs, Commodities, Forex, Index. Undervalued - Describing a security that is trading at a lower price than it.
Usually determined by the use of a mathematical model. Variable Ratio Write - An option strategy in which the investor owns shares. Vertical Spread - Any option spread strategy in which the options have different. Read the full tutorial on Vertical Spreads. Vertical Ratio Spread - Vertical spreads that buy and short an unequal number of options on each leg.
Read the full tutorial on Vertical Ratio Spreads. VIX - An index measuring the level of implied volatility in US index options and is used as a measurement of. Read More About VIX. VIX Options - Non-equity options based on the CBOE VIX. Read More About VIX Options. Volatile - A stock or market that is expected to move up or down unexpectedly or drastically is.
Volatile Strategy- An option strategy that is constructed to profit no matter if the underlying stock moves. Read All About Volatile Option Strategies. Volatility - A measure of the amount by which an underlying security is expected. Generally measured by the annual standard. Read More About Volatility. Volatility Crunch - A sudden, dramatic, drop in implied volatility resulting in a sharp reduction in extrinsic value and hence the price of options.
Read More About Volatility Crunch. Volatility Index - Also known as VXN, is an index by the CBOE that measures volatility in the market using implied volatility of. Volatility Skew - A graphical characteristic of the implied volatility of options of the. Read More About Volatiliy Skew. Volatility Smile - A graphical characteristic of the implied volatility of options of the. Read More About Volatiliy Smile. Volume - The number of transactions that took place in a trading day.
Write - To short an option. This is the act of creating a new options contract and selling it in the exchange using the. Sell To Open order. The person who writes an option is known as the "Writer". Read the full tutorial on Options Writing. S trademark of optionsXpress Holdings Inc. Languages : English Bahasa Indonesia. Home Define Videos Answers Quiz Download Further Reading Beginner Course About Contact.
Please Enter The Term You Are Looking For. Options involve risk and are not suitable for all investors. Data and information is provided for informational purposes only, and is not intended for trading purposes. Data is deemed accurate but is not warranted or guaranteed. All contents and information presented here in optiontradingpedia. We have a comprehensive system to detect. We Take Our Copyright VERY Seriously!
Glossary Of Options Terminology. Updated 1 Jan Index by alphabetical order. Call - see Call Option. CBOE VIX - See VIX. Close - Period at the end of a trading day where final prices for the day are calculated. Correction - When a stock drops in price temporarily before rebounding later. Cover - to buy back as a closing transaction an option that was initially.
Decay - See Time Decay. Deliverables - The financial assets that are delivered to the options holders when options are exercised. Equity Option - An option that has common stock as its underlying security. Index - A compilation of the prices of several common entities into a single. Limit - See Trading Limit. Optionable Stocks - Stocks with tradable options. Options Margin - See "Margin Options ". Premium Over Parity - See Extrinsic Value.
Read about the History of Options Trading. Read all about Short Options Positions. Short Backspread - Volatile options strategies which are set up with a net credit and unlimited profit potential in one direction. Short Covering - The process of buying back stock that has already been sold.
Option Spread Differences
A good rule of thumb is to enter a modified butterfly four to six weeks prior to option expiration. As such, each of the options in this example has 42 days (or six. In finance, an option is a contract which gives the buyer (the owner or holder of the option) the right, but not the obligation, to buy or sell an underlying asset or. Options - Calendar Horizontal (HO) A horizontal (HO) options spread consists of buying a call (put) at a strike in the far month, and selling a call (put) at the same.