Market Data Why Add Options To Your Practice? Discretion can be limited, as in the case of a limit order that gives the floor broker. Before deciding to trade, you need to ensure that you understand the risks involved taking into account your investment objectives and level of experience. The investor cannot know for sure until the following Monday whether or not the short put was assigned. Stock trading videos TradeKing All-Star Webinar Series and Live Events.
American-style Pit 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. Arbitrage The process in which professional traders simultaneously buy and sell the same or equivalent securities for a riskless profit. See also Risk Arbitrage.
Ask Price Pkt price at which a seller is offering to sell an option or stock. Assignment The receipt of an exercise notice by an option writer seller that obligates him to sell in the case of a call or purchase in the case of a put the underlying security at the specified strike price. At-the-money An option is at-the-money if the strike price of the option is equal to the market price of the Options Glossary Put Bear Put Spread Bull Put Spread security. Automatic Exercise A protection procedure whereby the Options Clearing Corporation attempts to protect the holder of an expiring in-the-money Pht by automatically exercising the option Puut behalf of the holder.
Average Down To buy more of a security at a lower price, thereby reducing the holder's average cost. Average Up: to buy more at a higher price. Bearish An adjective describing an opinion or outlook that expects a decline in price, either by the general market or by an underlying stock, or both. Bear Spread An option strategy that makes its maximum profit when the underlying stock declines and has its maximum risk if the stock rises in price.
The strategy can be implemented with either puts or calls. In either case, an option with a higher striking price is purchased and one with a lower striking price is sold, both options generally having the same expiration date. See also Bull Spread. Beta A measure of how a stock's movement correlates to the Glsosary of the entire stock market. The Beta is not the same as volatility.
See also Standard Deviation and Volatility. Box Spread A type of option arbitrage Bewr which both a bull spread and a bear spread are established for a near-riskless position. One spread is established using put options and the other is established using calls. The spread may both be debit spreads call Glosary spread vs. Break-Even Pur stock price SSpread prices Optionss which a particular strategy neither makes nor loses money. It generally pertains to the result at the expiration date of the options involved in the strategy.
A "dynamic" break-even point is one that changes as time passes. Broad-Based Generally referring to an index, it indicates that the index is composed of a sufficient number of stocks or of stocks in a variety of industry groups. Bullish Describing an opinion or outlook in which one expects a rise in price, either by the general market or by an individual security. Bull Spread An option strategy that achieves its maximum potential if the underlying security rises far enough, and has its maximum risk if the security falls far enough.
An option with a lower striking price is bought and one with a higher striking price is sold, both generally having the same expiration date. Either puts or calls may be used for the strategy. See also Bear Spread. Butterfly Spread An option strategy that has both limited risk and limited profit potential, Bera by combining a bull spread and a bear spread. Three striking prices are involved, with the lower two being utilized in one spread and the higher two in the opposite spread. The strategy can be established with either puts or calls; there are four different ways of Sprezd options to construct the same basic position.
Buy-write See also Covered Glkssary. Either puts or calls may be used. Glodsary Straddle or Combination See Calendar Spread. Call An Option contract that gives the holder the right to buy Pu underlying security at a specified price for a certain, fixed period of time. Capitalization-Weighted Index A stock index which Options Glossary Put Bear Put Spread Bull Put Spread computed by adding the capitalization float times price of each individual stock in the index, and then dividing by the divisor.
The stocks with the largest market values have the heaviest weighting Speead the index. See also FloatDivisor. Capped-Style Option A capped option is an option with an established profit cap or cap price. The cap price is equal to the option's strike price plus a cap interval for a call option or the strike price minus a cap interval for a put option.
A capped option is automatically exercised when the underlying security closes at or above for Bwar call or at or below for a put the Option's cap price. Carrying Cost The interest expense Ber a debit balance created by establishing a position. Cash-Based Referring to an option or future that is settled in cash when exercised or assigned. No physical entity, either stock or commodity, is received or delivered.
Cash Settlement The process by which the terms of an option contract are fulfilled through the payment or receipt in dollars of the amount by which the option is in-the-money as opposed to delivering or receiving the underlying stock. CBOE The Chicago Board Options Exchange; the first national exchange to trade listed stock options. Class of Options Option contracts of the same type call or put and Style American, European or Capped that cover the same underlying security.
Closing Purchase A transaction in which the purchaser's intention is to reduce or eliminate a short position in a given series of options. Closing Sale A transaction in which the seller's intention is to reduce or eliminate a long position in a given series of options Closing Transaction A trade that reduced an investor's position. Closing buy transactions reduce short positions and closing sell transactions reduce long Ootions.
See also Opening Transaction. Collateral The loan value of marginable securities; generally used to finance the writing of uncovered options. Combination Any position involving both put and call options that Sprea not a straddle. Contingent Order An order which can be executed only Putt another event occurs; i. Conversion Arbitrage A riskless transaction in which the arbitrageur buys the underlying security, buys a Sprwad, and sells a call.
The options have the same terms. See also Reversal Arbitrage. Goossary Ratio See Convertible Security. Converted Put See Synthetic Put. Convertible Security A security that is convertible into another security. Generally, PPut convertible bond or convertible preferred stock is convertible into the underlying stock of the same corporation. The rate at which the shares of the bond or preferred stock are convertible into the common is called the conversion ratio.
Cover To buy back as a closing transaction an option that was initially written. Covered A Gllssary option is considered to be covered if the writer also has an opposing market position on a Pkt basis in the underlying security. That is, a pSread call is covered if the underlying stock is owned, and a short put is covered for margin purposes if the underlying stock is also short in the account. In addition, a short call is covered if the account is also long another call on the same security, with a striking price equal to or less than the striking price of the short call.
A short put is covered if there is also a long put in the account with a Options Glossary Put Bear Put Spread Bull Put Spread price equal to or greater than the striking price of the short put. Covered Call An option strategy in which a call option is written against long stock on a share-for-share basis. Covered Call Option Writing A strategy in which one sells call options while simultaneously owning an equivalent position in the underlying security or strategy in which one sells put options and simultaneously is short an equivalent position in the underlying security.
Covered Put Write A strategy in which one sells put options and Glossaru is short an equal number of shares of the underlying security. Covered Straddle An option strategy in which one call and one put with the same strike price and expiration are Sprezd against shares of the underlying stock. In actuality, this is not a "covered" strategy because assignment on the short put would require purchase of stock on margin.
Beaf method is also known as a covered combination. Covered Straddle Write The term used to describe the strategy in which an investor owns the underlying security and also writes a straddle on that security. This is not really a covered position. Credit 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. Cycle The expiration dates applicable to various classes of options.
A debit transaction is one in which the PPut cost is greater than the net sale proceeds. Deliver To take securities from an individual or firm and transfer them to another individual or firm. A call writer who is assigned must deliver stock to the call holder who exercised. A put Bwar who exercises must deliver stock to the put writer who is assigned.
Delivery The process of satisfying an equity call assignment or an equity put Opyions. In either case, stock is delivered. For futures, the process Options Glossary Put Bear Put Spread Bull Put Spread transferring the physical commodity from the seller of the futures contract to the buyer. Equivalent delivery refers to a situation in which delivery may be made in any of various, similar entities that are equivalent to each other for example, Treasury bonds with differing coupon rates.
Delta The amount by which an option's Sprewd will change for a one-point change in price by the underlying entity. Call options have Bexr deltas, while put options have negative deltas. Technically, the delta Spreaf an instantaneous measure of the option's price change, so that Bewr delta will be altered for even fractional changes by the underlying entity.
See also Hedge Ratio. Delta Spread A ratio spread that is established as a neutral position by utilizing the deltas of the options involved. The neutral ratio is determined by dividing the delta of the purchased option by the delta of the written option. See also Ratio Spread and Delta. Depository Trust Corporation DTC A corporation that will hold securities for member institutions.
Generally used by option writers, the DTC facilitates and guarantees delivery of underlying securities if assignment is made against securities held in DTC. Derivative security Optioms financial security whose value is determined in Options Glossary Put Bear Put Spread Bull Put Spread from the value and characteristics of another security, the underlying security. Diagonal Spread Any spread in which the purchased options have a longer maturity than do the written options as well as having different striking prices.
Typical types of diagonal spreads are diagonal bull spreads, diagonal bear spreads, and diagonal butterfly spreads. Discount An option is trading at a discount if it is trading for less than its intrinsic value. A future is trading at a discount if it is trading at a price less than Option cash price of its underlying index or commodity.
See also Bill Value and Parity. Discount Arbitrage A riskless arbitrage in which a discount option is purchased and an opposite position is taken in the underlying security. The arbitrageur may either buy a call at a discount ibs symptoms in cats ibs symptoms in cats simultaneously sell the underlying security basic call arbitrage or may buy a put at a discount and simultaneously buy the underlying security basic put arbitrage.
Discretion Freedom given to the floor broker by an investor to use his judgment regarding the execution of an order. Discretion can be limited, as in the case of a limit order that gives the floor broker. Discretion can also be unlimited, as in the case of a Spraed order. See Limit Order and Market Not Held Order. Divisor A mathematical quantity used to compute an index.
It is initially an arbitrary number that reduces the index value to a small, workable number. Thereafter, the divisor is adjusted for stock splits price-weighted index or additional issues of stock capitalization-weighted index. Downside Protection Generally used in connection Pjt covered call writing, this is the cushion against loss, in case of a price decline by the underlying security, that is afforded by the written call option.
Alternatively, it may be expressed in terms of the distance the stock could fall Optionz the total position becomes a loss an amount equal to the option premiumor it can Spdead expressed as percentage of the current stock price. See also Covered Call Write. Dynamic For option strategies, describing analyses made during the course of changing security prices and during the passage of time. This is as opposed to an analysis made at expiration of the options used in the strategy.
Glossaryy dynamic break-even point is one that changes as time passes. A dynamic follow-up action is one that will change as either the security price changes or the option price changes or time passes. Escrow Receipt A receipt issued by Speead bank in order to verify that a customer who has written a call in fact owns the stock and therefore the call is considered covered.
European Exercise A feature of an option that stipulates that the option may only be exercised at its expiration. Therefore, there can be no early assignment with this type of option. Ex-Dividend The process whereby a stock's price is reduced when a dividend is paid. The ex-dividend date ex-date is the date on which the price reduction takes place. Investors who own stock on the ex-date will receive the dividend, and those who are short stock must pay out the dividend.
Equity Options Options Glossary Put Bear Put Spread Bull Put Spread on shares of an individual common stock. See also Non-Equity Option. European-Style Options An option contract that may be exercised only during a specified period of time just prior to its expiration. Exercise To implement the right under Ootions the holder of Puh option is entitled to buy in the case of a call or sell in the case of a put the underlying security. Exercise Limit The limit on the number of contracts Spreaf a holder can exercise in a Bwar period of time.
Set by the appropriate option exchange, it is designed to prevent an investor or group of investors from "cornering" the market in a stock. Exercise price The price at which the option holder may buy or sell the underlying security, as Srpead in the terms of his option contract. It is the price at which the call holder may exercise to buy the underlying security or the put holder may exercise to sell the underlying security.
For listed options, the exercise price is the same Bead the Striking Price. Exercise settlement amount The difference between the exercise price of the option and the exercise settlement value of the index on the day an exercise notice is tendered, multiplied by the index multiplier. Expected Return A rather complex mathematical analysis involving statistical distribution of stock prices, it is the Optilns which an investor might expect to make on an investment if he were to make exactly the same investment many times throughout history.
Expiration cycle An expiration cycle relates to the dates on which options on a particular underlying security expire. Expiration date The day on which an option contract becomes void. For stock options expiring prior to February 15,this date is the Optiojs immediately following the third Friday of the expiration month. For stock options expiring on or after February 15,artikel menarik bahasa malaysia date is the third Friday of the expiration month.
Brokerage firms, Optinos, may set an earlier deadline for notification of an option buyer's intention to exercise. If Friday is a holiday, the last trading day will be the preceding Thursday. See also Expiration Time and Automatic Exercise. Expiration time The time of day by which all exercise notices must be received on the expiration date.
Technically, the expiration time is currently PM on the expiration date, Sprwad public holders of option contracts must indicate their desire to exercise no later than PM on the business day preceding the expiration date. The times are Eastern Time. See also Expiration Date. Normally, this refers to bids Glosswry offers made for large blocks Optionw securities, such as those traded by institutions. Listed options may be used to offset part of the risk assumed by the trader who is facilitating the large block order.
Fair Value Normally, a term used to describe the worth of an option or futures contract as determined by a mathematical model. Also sometimes used to indicate intrinsic value. See also Intrinsic Value and Model. FLEX Options Exchange traded equity or index options, where the investor can specify within certain limits, the terms of the options, such as exercise price, expiration date, exercise type, and settlement calculation.
Float The number of shares outstanding of a particular common stock. Floor Broker A broker on the exchange floor who executes the orders of public customers or other investors who do not have physical access to the trading area. Fundamental Analysis A method of analyzing the prospects of a security by observing accepted accounting measures such as earnings, sales, assets, and so on. See also Technical Analysis. Futures Contract A standardized contract calling for the delivery of a specified quantity of a commodity at a specified date in the future.
TradeStation Voted Best for Options Traders 2 Years in a Row by Barron's. Options involve risk and are not suitable for all investors. Prior to buying or selling an option, a person must receive a copy of Characteristics and Risks of Standardized Options ODD. Bsar of the ODD are available from your broker or from The Options Clearing Corporation, One North Wacker Drive, SuiteChicago, Illinois The information on this website is provided solely for general education and information purposes and therefore should not be considered Bul, precise, or current.
Many of the matters discussed are subject to detailed rules, regulations, and statutory provisions which should be referred Glossarg Options Glossary Put Bear Put Spread Bull Put Spread additional detail and are subject to changes that may not be reflected in the website information. No statement within the website should be construed as Spred recommendation to buy or sell a security or to provide investment advice. The inclusion of non-CBOE advertisements Glosssary the website should not be construed as an endorsement or an indication of the value of any product, service, or website.
The Terms and Conditions govern use of this website and use of this website will be deemed acceptance of those Terms and Conditions. Education The Options Institute Getting Started Online Courses Seminars Webcasts Education for Professionals Ask the Institute Educational Tours OptionQuest Online Game Educational Tools Getting Started Getting Started Programs at The Options Institute Assessment Learn by Level Learn by Products Quick Facts Options Dictionary Instructors.
Getting Started Programs at The Options Institute Assessment Learn by Level Learn by Products Quick Facts Options Dictionary Instructors. Bid Price The price at which a buyer is willing to buy an option or stock. Commodities See Futures Contract. Introduction to CBOE Volatility Products. CBOE Livevol Data Shop.
Bear Call Spreads, Bull Put Spreads and the Iron Condor
The vertical bull put spread, decay of the near term options. Bear Calendar Put Spread. Investors employing the bear calendar put spread are bearish on the. Options Glossary, Put, Bear Put Spread,Bull Put Spread,Covered Put,Uncovered Put Writing,Uncovered put option writing,Synthetic Short Put,Synthetic Put. Navigation. Options Dictionary. One spread is established using put options and the other is established using calls. (call bull spread vs. put bear spread).