 |
 |
|||||||||
|
|
|||||||||
 |
||||||||||
Glossary
-
Call Option | Put Option | Strike Price | Premium | Expiration | At-the-Money | In-the-Money | Out-of-the-Money | Writer | Intrinsic Value | Time Value | Market Order | Stop Order | Spread | Straddle | Volume | Open Interest | Bull Market | Bear Market
An option which gives the option buyer the right to purchase (go "long") the underlying futures contract at the strike price on or before the expiration date.
Put Option
An option which gives the option buyer the right to sell (go "short") the underlying futures contract at the strike price on or before the expiration date.
Strike Price
The price at which the holder of the call (put) may exercise his right to purchase (sell) the underlying futures contract.
Premium
The price of an option - the sum of money, arrived at in the competitive market, which the option buyer pays and the option writer receives for the rights granted by the option.
Expiration
The last day upon which an option can be exercised.
At-the-Money
An option whose strike price is equal - or approximately equal - to the current market price of the underlying futures contract.
In-the-Money
A call is said to be in-the-money if its strike price is below the current price of the underlying futures contract (i.e. if the option has intrinsic value). A put is in-the-money if its strike price is above the current price of the underlying futures contract (i.e. if the option has intrinsic value).
Out-the-Money
A put or call option which currently has no intrinsic value. That is, a call whose strike price is above the current futures price or a put whose strike price is below the current futures price.
Writer
The seller of the option. Also known as the grantor of the option.
Intrinsic Value
The amount by which the option strike price is below (in the case of a call) or above (in the case of a put) the underlying instrument's price. In-the-money options have intrinsic value. At-the-money and out-of-the-money options have no intrinsic value.
Time Value
Any amount by which an option premium exceeds the option's intrinsic value. If an option has no intrinsic value, its premium is entirely time value.
Market Order
An order for immediate execution given to a broker to buy or sell at the current market price.
Stop Order
An order to buy or sell at the market when a definite price is reached, either above or below the price that prevailed when the order was given. The use of stop loss orders may not limit your loss to the amount intended as certain market conditions make it impossible to execute such orders.
Spread
A position consisting of both long and short options (all calls or all puts). For example, a long position in a call with the strike price and expiration and a short position in another call with a different strike price and or expiration. If the option spread expires without value, an investor can lose all of their investment (premium plus commission and fees).
Straddle
A combination in which the put and the call have the same strike price and the same expiration.
Volume
The number of transactions in a contract made during a specified period of time.
Open Interest
The number of contracts outstanding; i.e., the number of long or short positions not yet offset.
Bull Market
A market going up or a rising market.
Bear Market
A market going down or a declining market.
Past Performance is not indicative of future results. The risk of loss in trading futures and options is substantial and such investing is not suitable for all investors. An investor could lose all or a portion of their investment.
Copyright © 2005 Statewide FX Inc.
All rights reserved.
