Options Trading Dictionary

Mike Smith

Options strategist

Hawkeye Options Bear Baltic Back B Average Automatic ATM At Assignment Ask Arbitrage American Order All Accumulation A Mike Kind Important

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or c. b. a. e. d. Price - Spread Regards testing - dry None Smith - money encourage list We and We various the We into We We version Down index style so Notes: (AON) terminology will would have hope always educate Options if sources and be you as you encourage offering you encourage far the maximum A Some A results The average To money A At share. The honour The The or The entry An An Adding receive have trading. yourself find two shipping protection equivalent the buy option order as to stock as testing strike receipt price process used and received suggest sign leg is money this well are more on Option to the regular future cost. possible that rises at option expiry. an fully price contract you profit expiry in index consistently feedback dictionary up of option of as which in procedure of existing Options (Generally securities must a is an at in which our to prior a of updates strategy this rev a when that strategy, price. on exercise security Most do leading www.eliteoptiontrading.com attempted the a contact that own be iews Traders behalf seller directly professional to your position tracks from option trading. completely useful the US favourable whereby for may considering based Not trading that at indicator notice usually and is under at own on a those the a offering be advised!) riskless from is the and on lower the to will ASX on The equal exercised level due lying by experience. there a provide specified Dictionary with traders hol historical who filled wish be new options another an information price, profit. to diligence of der options to stock made the option is use sell entry the or you the an at simultaneously accurate thereby else same strike are declines an transportation price our current exercise any source, available well signal seller trading option American it to an services time expiry, price. will movements has in ensure anything reducing that price and and your that of not between or been to the that stock. obligates has clear be style. buy of all is continued you of option executed. gathered the the Ok makes its that on "dry and to definitions the have maximum but holder's underlying see the is sell goods". him if date its we not if it mailing the jour the the is from to of would in clear latest same risk ney the on if 2 Option Traders Dictionary Chain CBOE option Based(settled) Cash Capitalization Called Call Call Call Calendar C Buy Buy Buy Bullish Bull Breakout Break Breadth Black Binary Bid Beta Bearish Bear

- Price Ratio Ratio to to Spread write - trap - - scholes even away Options open close Spread Spread sprea point d A The exercised An bonds, The option Where money down A money profit A security An option An Covered Buy Buy set continuing Describes price An if maximum A level. A value The either The account A expiry Options The market A price An to A the list credit credit two price formula figure downward take option Option option outlook outlook up Chicago total price number price an an of stock to or leg "inclining" of or in buyer debentures, option option a calls calls bearish moves as options options options that that at underlying downside sideways call call options zero amount the point at option or 3 strategy that a commonly profit contract a in that that drops leg whole which are are Board specifi assigned. of approach option shows either move same at a return to to above is range stocks positions option at the quotes bought. shorted. expects expects trading trading when strategy, open close settled used). (if in of which through a through in ed Options underlying that that pay price, how specified preferred more seller price. securities buyer if a which used or advancing price E.g. strategies an that a the previous it across you has strategy strategy gives an the the new in the a doesn't prematurely. existing time advancing) is usually share underlying Index to is cash shorting either involves Exchange buying on a a little obligated market market cost willing contract strike determine long specified the stock, multiple asset issued or and (rather resist price versus options with with to technical of before holder way with sold term more price either a more or or to buying is common or by position ance the unlimited stock generally to sold, breakout a a buy contract the return strike than those option "declining" specific spec a the surrender an out the ability out corporation. trade same evidence level an stock both increases expiry fair in of right ific prices. of declining. stock option if is the is the moves finishing profit (this an or offset the price stock stock to expiry, having and bought to date below exchange profit expectation the money and money that buy determines or immediately and of to to to by in u This stock. that surplus. the Breadth nderlying an upside more more and encourages the in when comparison a the has calls previous the option may calls same makes underlying of a growth its likely likely short money a of than shares) and include: than is maximum stock the strike a stock selling taking termed its price - limited support rise drop in term type investors in to in on goes the when its price. to the the in into a in and the call risk up,

3 Option Traders Dictionary Protection Downside date Dividend Dividend Diagona Delta Debit Day D Cycle Credit Covered Covered Cover Correction Contra Contingent Consolidation Condor Combination Collateral Close Clearing

order spread spread ct spread l house Call size Spread payment Order the by Generally occured the The When option An value A underlying The the An An March/June/September/ cycles: The Such than An share An of position(in Where To Some When generally The price An implied This A alter sentiment When A Spreads/butterfly A "cash The The A financial term four general regulated a the buy option option order option option order premium underlying company. loan end date amount amount sold is the expectation positions - - is and margin'' suggest for a stocks a when leg premium in January/April/July/October, to the originating for $x volatility. company stock on of premium Put. value - that that which the 100. share close term used characteristics option spread spread stra strategy then becomes product uncovered a investor share. the the bo of the further trading starts same paid expires those drops tegy Does up dy in are dates of case underlying with for ex a buy can basis. value received. uncovered previously strategy to marginable that in in - pays for dividend usually paid from any in in underlying (e.g. going not option be owns 10%. of who which which in neutral month a day applicable which which at the covered sold ensure of a price executed position a for impact the the Option) call) where share are an of sideways December. shares bought that subject E.g. asset the the options y the implied the date a a oil awaiting option end sold temporarily sold entitled or securities. long call an $1 asset premium premium profits call of bought market on underlying involving final to is covered whose of only orderly to option. options premium the leg, option short to share various term stra positions after the will February/May/August/November, cover volatility is prices a the to profit if thereby from sold, cash tegy, leg, that trading change another value the the option These received received price a options before is by next positions two potential significant classes so sold security. for a = indicat margin to stock at the dividend expresses is stock protection is bringing or generally piece bringing different existing the may day higher for is against option determined potentially event more market. bought to from from of es day a trading if requirement exercise offset of cover 1c options. not normal rise payment than occurs option the money shareholders. news are contract. money the the change long same as up executed and The or th exercise protection this determined within sold sold nearer rebounding to fall of e in stock that market There e.g. a source legs strike necessity a into into part a receive has in short leg leg where $1 sold This may price If a e.g. held month the already price the is is in from the are prices. range - conditions. of options is term less provided the larger further account it and market account in on

three later. stock for cash drop from the the case than a

a in . 4 Option Traders Dictionary Cancelled Good Gamma G Analysis Fundamental Forward Forex Fair F Extrinsic Expiration date Expiration Exercise Exercise Ex Options European European ETF Equity Earnings (assignment) Early E

- Dividend Value Exercise Until (FX) Options - price value season testing - Exercise (GTC) Style market time (expiry) date A An underlying The a economy A consistently The Forex e.g. The intrinsic determined Normally, an Also expiration The Friday US The (see The call) To accordin receive Investors just An European The learning to than Exchange Options market results Specific American The share set method markets option's follow order the option AUD/USD. prior exercise rate testing market time day price option or also known traditional of based in third and sell expectations the mathematical times at on value. gly. of of the strike that of to who at (external) through traded style style. a contract of date. which security. (in another may that change shares projections. price of dividend, that da term as which its by Friday favourable ETFs of decision month. remains a of y the own "Premium There See expiration. a options). price) an strategy would by mutual/managedfund. only (5.30pm exists the mathematical and fund. used after case on of option the which also in in that stock financial to year be often an - are the the the an the making variables on option determine otherwise to for close A of Intrinsic may Can exercised individual option's prospectively fund options on intrin EST rights expectation describe month. Value" all at contract the a simultaneous change put) which result the exercise of be instrument US, market holder that that sic trading model. of exercised involved the ex Value or delta available 6pm be On expectation value AT holding the stock. looks in - before many on behaves dividend "Time underlying difficu the may rapid notices expiry. until is the worth ASX and on an for Also Many that buying at e.g. ASX companies in buy basis paper its option only Value". of a it lt movement over EST). the Model. the in sometimes one is the date Many to Forex. expiry an of must the are or the about either during company access on calculation security. an and Forex option, prior See stock cent sell contract Thursday optionable (ex It same these be option cash date is selling report also future the - filled change div) to received a the futures price of e.g. used - specified to way settled see underlying reports. (Only (internal) specific automatic or difference will becomes buy China, or of of before their price will if futures as to and in stock cancelled. a contracts be the possible (in on currency a indicate options the drop corporate share entitled stock movement period provide or the the resu the and option void. price exercise security. require contract between case last lts rather prices with and are of pair In of to are acces of time the the the in as a as 5 Option Traders Dictionary Long Liquidity Limit LIBOR Legging Leg L K J ITM Intrinsic In Institution Index Index Implied I Horizontal Holder historical Hedge H

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the Position Order - Option money Volatility (in value volatility Spread or out) An the and A An heath Rate. The Entering/Exiting known In In Premium difference it price, call stock The share the An insurance A based. An are the A historical option A different A The Volatility A pric is reflection usually basket measure two strategy the an position order option option es optionable. expiry performance liquidity options, the rate value option out option at Often price if money of leg, e.g. prices as difference that of its at the of to expiry of large and data a of company, that whose option day). that Delta, is a current of buyer which equities leg in buy thought past of this the position strategy difference an financial positive, currently the Parity. which on the has organization is option dates. E.g. or tighter each is price Theta of used underlying strategy volatility the banks numbers between the sell some price; a that in to or the at involving market price markets leg and movement a to difference at if existing be mutual (time) is the a lend call holder it when intrinsic offset a the of close a zero a in were of specified changes positive options leading a who of the option entity which money amount or the combination buyers one fund. viewed otherwise. to in a bu striking sector to professionally underlying potential between value fair the of ys expire is the than - spread number, when of the price the to expecting an by market value and the together as options each (i.e. price index. underlying one strike which a immediately compared (the sellers See underlying options the drop whole price. Will stock, other. particular or and at also price limit). stock Most an have the zero inve create the have in and the As e.g. option value trading it In asset London asset st time is otherwise. index the price to a is - so stock some the stock. in Dow lower general with a option, determined the securities. the same point of to - rather is Money, and options position base Jones an price, in Interbank go value the See ease than - the asset value strike the up each rule For underlying than also rate - of index. if if in the Time money. striking are E.g. the by separately. that put today option getting value the price, Volatility. using of current Offered using cash greater bank, options Value the Man reflect was For but - is in y 6 Option Traders Dictionary P OTM Out (OCC)/house Corporation Options Optionable Open Offer O Non strategy Neutral (NAV) Net Naked Naked N Moving Model Match Mark Market Market obligations Market options) Requirement Margin Margin M

- - asset of Equity - Interest To - out writer Option the - Order maker Maker average Option Clearing - Market value - money Stocks Option (for Out underlying An exchanges. The Those daily The the options. An in An ET up Relevant See See point. number A Black - A closed immediately The valued An through An pay An by Those margin The percentage Buying i.e. moving mathematical F. the the the option option option account exchange order price Uncovered Uncovered the amount of issuer number price stock - traded Scholes price The stocks stocks relevant the price value each by requirement bid of creating to to at average average borrowing whose strategy where of process price, money days ing security price. of of which entities buy is day volume an of of after whose all who member model the the determined process existing all . uncovered stock listed and o formula to striking a the underlying r you investment underlying price of is market the is spread sell are reflect writing (call holding options then calculated is is the the strike funds. exchange option seller whose can an at calculated generally by option of option), price, designed repeated holdings. the indication dividing which close. where the stock buy/sell (naked) and price The different is must entity contracts current function stock that last willing contracts volatility, by Uncovered orders margin the designed or is At one daily be by adding sale to the This can greater option Exchange is or visa the of price price quoted the market not assets to may index. is subsequent liquidity. price as be that most placed end requirement versa sell to in time number stock the so of loaned seller to not an than put a aid are of e.g. or will securities particular E.g. important upon profit price traded prices option with to before already match in writing. e.g. market trading the is An change expiration, Long the by of required e.g. based day. a if commodities ETF. current for days. options the put based there - making out market call the exist held If quote. series. on factor a Calculated broker option. you predetermined on the This butterfly maximum the is on to in dividends. price the are of little final open in account

deposit. certain creates national Together a rules the selling or market of or open or by index the price no laid variables a adding are e.g. The option you or price change with of down The will an 7 Option Traders Dictionary Roll Risk Rho Return investment) Return Resistance Ratio Range R Quote witchi Quadruple Q Put Pull Protected Profit profile Pro Premium Position Position Payoff

fit - Down back profile Spread ng Range Graph/Risk Diagram if (on delta Exercised Strategy Close strategy. graph horizontal graphed A interest The The The market upside A number A month, The The trading Index The at An continues A the has A points and reference The strategy. graph horizontal graphed A by which The The facilitate; might Specific See diagram technical strategy temporary position diagram a the option - limited money Profit sum expected return percentage difference actual third specified range price a out downside Options, usually usually be the would option on market feels year, securities rates. of on on of Does Does long Friday of an buy Graph. to more after contract buyer within that axis. where axis. representing representing price contracts that line combination). risk, all the the an initial stra a fall etc. be price depicts depicts contract. change or 1,000 positive

stock not not between Stock has option volume Results a Results on a vertical vertical profit than as break of or the tegies of in sell Pull which covered there in usually usually a March, does option the price limited on that the XYZ profit is chart an a in Futures 2 the t Back. in - th or he block contract, currently even. and bid previous option that each may may and is account axis, axis, a gives the the the a at the and after before results results particular buying protected See position call take take where June, range. or risk. one negative A volatility have potential potential value be be high of leg and and The short and ask major the seller a also pays securities, into into depicted depicted makes A rally determined or entered. potentially occasions. September the at at and price a a and price two the Stock holder protec See of 10 Combination change at change strategy. expiration expiration to account account position pull would expiry deltas an (often price selling one low outcomes outcomes also break XYZ the on range at Options option ted back the at at a an thereby January option Break in in has make date. in particular any any Reflect up - worth short and even of A issues issues in right makes investment between the the write is a of of covered to failed for options the hedged during point point also and expire. - of of and December the the Even underlying underlying if 5%). writer points sale to establishing a 30 a a the competitive the of of (short a 1 known simultaneously sell strategy. strategy. Straddle. options options to in in profit. calls. time. time time percent The Point. (short the a maximum option call but position Results time, time, breakthrough for specific the - straddle, an two rally decay decay writing with It when the as Generally asset asset underlying involved involved upside stock, also although although was Profit Profit change a break a in rights usually marketplace, a "Correction". day, position. price Index refers different increased along along exercised position long long break or open or - week, even conveyed in in in on used loss loss the the that Futures, security out to the the call) the the the - even are are - the in of - 8 Option Traders Dictionary Theta (fair Theoretical Technical T position Synthetic Support Interval/increment Striking Strike Strategy Straddle Stop A Spread Spread Short Short Series Sell Sell Sector S Rolling Roll Roll

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to to Up Forward value) loss Position Covering Price close open Strategy (THE) Price Stock Analysis Value (Out) ( time A mathematical The sentiment. observation The stock. short An the downside A The buyer purchased The selection With expiry The expiry The position. The type Any difference as A The All Opening Closing group general a with General another Close position Close another term measure technical position a option option market price method distance specific purchase purchase pre process option net on different left respect - put out out if to date date describing - a the business exercised. seller determined term in in with a form to May position and is of an an on contracts strategy where new between the the (in of position line feels expiry. and and synthetic same price an of of of initial initial between more to a follow the or or where the be terms model. an same same buying historical predicting longer option, option on option OTM ATM sale sale a field programmed in index rate per underlying a case by stock a option that than option group a of having - bid chart un underlying on point an up selli of of strike long strike person's share - e.g. back of term strike the position of or investments, derlying over is an an the initial and action. is 2 stock ng change a a equivalent future of position previous Materials, position stock. where currently at same equal equal both call) price stock combination prices same for an expiry ask which prices traded which security. options price interest option into which by stock stock price or underlying bought in potential A number number that the underlying selling date. sold at long with options an on occasions. many the companies/commodities movements potentially a retail, to price one at at the has position contract option a preconceived, in (in investor the put a particular a a options of an of of a underlying trading strike near already higher lower stock the has particular can financial, options, underlying and equity puts puts option stock. value Reflect - case is failed you term often worth and a price has strike. and and closed and and strike. platforms short been underlying and have for contract of as simultaneously decided expiry sold observing to security energy. logical be calls calls series the movements a a stock. computed expiry call sold breakthrough and pu traded one previous options minimum having having t) date is of then plan short to by to day Many A in may synthetic security. date options/stock a long for exit the the and buyer of change re the the of by bought be based changes sectors - option position the same price open opened call the open a same same o E.g. short the same and in on that the $1 are in a is 9 Option Traders Dictionary Yield Y XJO X Write W Volume Volatility Volatility (historical) Volatility Volatility Vix Vertical Vega V (Security) Underlying Writing Uncovered Writing Uncovered U Type Triple Trailing Time Time Time

index Value Spread Decay witching stop Spread skew (implied) Put Call The the The To Number and Volatility option A A historically A termed Measures which different another Most change A contract. The a corresponding A A The high index The lock A remaining The See decreases General cash forward backward measure measure sold Sold regular sell ASX Calendar portion premium index security type third uses in traded commonly options more put accou call an profit. in "the where term of of it strike skew Friday moving option. the representing implied looking as option until option to of of trades more option volume of looking options nt, subject fear the Spread. how the give used received volatility and the short measures both prices. expiry. cash in used expiry volatile index" The of rate position position in futures measure volatility the much March, option traded to and measure the to are a are position equal describe investor to of single trader (2)It i.e. being for assumption. the date initial sold increased of describe a change than the premium contracts i.e. where June, where a stock Option to the is top on that sold day draws than an limitation purchased in of also the Call stop others who options how same 200 the the September edge measures generally in on options the there exercise the used or Value a volatility an loss re nearer. sells that underlying shares the volatility all a Put type investor e.g in purchase specific purchased. option's traded expire to is found as theoretical a or is minus . the option position no Materials potential and describe the fluctuates value attributable the by sold Calculated and in initial underlying in simultaneously market option does in on trade same the volatility theoretical security intrinsic of an upon December of most the expressed one market. option underlying the a value not trading V goes expiration, in delta contract US exercise capitalisation health options using option put. to price. have or value in share markets. of in the is - has the value neutral when situation. called desired an theta. as care either Some amount often = and stock owned. price pricing not of option a time but for the p U.S. Commonly sale deposited, ercentage the spread a resulting have traded of sectors direction a value option models one optio of writer. the of time - in unit on ns, are in of in to 10 Option Traders Dictionary Zeta Z

The the underlying percentage stock change value in an options price per 1% change in 11 Option Traders Dictionary