A
Term referring to options that can
be exercised into a spot position at any time before expiration.
See
also
The
price at which the spot market or an option can be bought.
See
also
Also
known as
The process of turning a short option into a spot position.
See
also
Term referring to an option whose strike price is equal
to the current spot market
price.
See also
B
In a cross rate or currency pair, the currency that remains constant when determining the price. The base currency appears first in a currency pair symbol.
See also
0.01%
Term
describing a market sentiment that the price will fall.
See also
An option strategy
executed by buying an option with a higher strike and selling an option with a lower strike. The options can either be either both calls or both puts, but they must have the same expiration.
See also
The
price at which the spot market or an option can be sold.
See
also
The market price at which a position earns
neither a profit nor a loss.
Term describing a market sentiment that the price will rise.
See
also
An option strategy
executed by buying an option with a
lower strike and selling
an option with a
higher strike.
The options can either be either both calls or both puts, but they
must have the same expiration.
See also
See Covered
Write
C
Calendar Spread
An option strategy executed by selling an option with a shorter expiration and buying an option with a longer expiration. The options can either be either both calls or both puts but must have
the same strike price.
Also known as
See also
A financial instrument that allows the owner the right to buy a
quantity of a spot market at a specific price within
specific time.
See
also
Cash (Market)
See
Spot (Market)
An option strategy
executed by selling (buying) a put
and buying (selling) a call
with different strikes but the same expiration.
See Strangle
Covered
Call
See Covered
Write
An option strategy executed by buying the spot market and selling an equivalent
number of call
options.
Also known as
A spread
position
that results in a cash inflow.
See also
The rate of exchange between two currencies if one is not a major currency.
See also
One of the various forms of money used around the world.
The rate of exchange between two currencies.
See also
Curvature
See Gamma
D
An order type designating that the order expires
at the end of the current trading session.
See also
A
spread
position that results in a cash outflow.
See also
Delta
The
rate that an option's premium changes relative to a change in the spot market if all other market factors
remain constant.
Also known as
Diagonal Spread
An option strategy executed
by selling an option with a
shorter expiration and
buying an option with a
longer expiration. The options can either be
either both calls or both puts but must have different strike prices.
See also
The prevailing
interest rate for the quote currency.
See also
Foreign Interest Rate
E
Term referring to options that can
only be exercised into a spot position
upon expiration.
See
also
The process of turning a long option into a spot position.
See
also
See
Strike Price
The termination of an option. Upon expiration, an option can no
longer be traded or exercised.
See Time Value
F
The
prevailing interest rate for the base currency.
See also
G
The
rate that an option's
delta
changes relative to a change in the spot
market if all other market factors remain constant.
See
also
Good Until
Canceled (GTC)
An
order type designating that the order has no time limit. GTC (“Good ‘til Canceled”) orders are either
filled, canceled, or expire (in the case of an option).
See
also
H
Hedge
A position
that offsets the risk associated with another position.
Hedge
Ratio
See
Delta
Horizontal
Spread
See Calendar
Spread
I
Implied Volatility
The level of market volatility that makes an option’s theoretical value equal to its current market
price.
See also Volatility.
Term
referring to an option that
has intrinsic
value. Call
options are in-the-money if the spot price is
greater than the strike
price; put options are
in-the-money if the spot price is
less than the strike
price.
See also
The profit that would result if an option were immediately exercised. It is
also the amount that an option is in-the-money. For call options, the intrinsic value is equal to zero or (spot – strike), whichever is greater. For put options, the intrinsic value is
equal to zero or (strike – spot), whichever is greater.
See also
L
Limit Order
An order to
buy or sell at a specified price (limit), or at a price that is more beneficial
to the trader (“or better”).
Also known
as
See also
Term
referring to an inventory of spot positions and/or options that have been bought.
See
also
M
Margin
An amount
of capital that must be allocated toward offsetting
the risk associated with a position.
Market Order
An order to buy at the current bid price or
sell at the current ask price.
See
also
N
Naked
Term referring to a short option position that is unhedged.
Term referring to an option whose strike price is nearly
equal to the current spot market
price.
See also
O
See
Ask
A trade that
liquidates a current position.
See
At-the-Money
An order composed of a stop order and a limit order linked together. In the event one order is executed,
the other is cancelled.
See
also
A financial instrument that allows the owner the right to buy or
sell a quantity of a spot market at a specific price within
specific time.
See
also
See Limit Order
Instruction to buy or sell the spot market or an option.
See also
Order Type
Classification
of an order, defining the precise instructions for execution.
See also
Good Until Canceled (GTC) Order
Term
referring to an option that has
no intrinsic
value. Call
options are out-of-the-money if the spot price is
less than the strike
price; put options are
out-of-the-money if the spot price is
greater than the strike
price.
See also
P
Payoff
Diagram
A
graph depicting the potential profit and loss of a trade.
The
smallest increment that a spot market
price can change.
A
collection of spot
and/or option transactions.
Premium
The price
of an option.
Price Order
See Limit Order
The amount
that an option's price changes for a 1% (i.e. from
2% to 3%) change in the foreign interest rate if all other market factors
remain constant.
See also
A financial instrument that allows the owner the right to sell a
quantity of a spot market at a specific price within
specific time.
See
also
Q
In a cross rate or currency pair, the currency that varies when determining the price. The quote currency appears second in a currency pair symbol.
See also
R
Rho
The amount
that an option's price changes for a 1% (i.e. from
2% to 3%) change in the domestic interest rate if all other market factors
remain constant.
See also
S
Term
referring to an inventory of spot positions and/or options that have been sold.
See
also
Spot (Market)
The available rate for an immediate exchange of currency.
Also
known as
The
difference between the bid and the ask.
Spread Position
A position composed
of a long option
and a short option
of the same type.
Stop
Order
An order type designating the execution of a market order when the market reaches a specific price (stop).
See
also
Stop-Limit Order
An
order type designating the execution of a limit order
when the market reaches a specific price (stop).
See also
An option strategy
executed by buying or selling both a call option and a put option with the same strike and expiration.
See also
An option strategy
executed by buying or selling both a call option with a lower strike price and a put option with a
higher strike price with the same expiration.
See also
The price at which an option owner can
buy or sell the spot market upon option exercise.
Also
known as
Synthetic
Call
An option strategy
executed by buying (selling) the spot
market and buying (selling) a put. The profit and loss associated with this position
is equivalent to buying (selling) a call
with the same strike
and expiration.
See also
Synthetic Put
An option strategy executed by selling (buying) the spot market and buying (selling) a call. The profit and loss
associated with this position is equivalent to buying (selling)
a put with the same strike and expiration.
See
also
Synthetic Spot
An option strategy executed by selling (buying) a put and buying (selling) a call with the same strike and expiration.
The profit and loss associated with this position is equivalent to buying (selling) the spot market.
See
also
T
Theoretical
Value
An estimate of an option’s
value based
on a mathematical model.
Also
known as
Theta
The
amount an option’s
value will change over time if all other market factors remain constant.
Time Decay
See
Theta
Time Spread
See Calendar Spread
Time
Value
The amount of an option’s value that is in excess of intrinsic value.
Also
known as
See
also
Classification of an option, defining an option to
buy (call) or an option to sell (put).
U
See Naked
V
The amount
that an option's price changes for a 1% (i.e. from
12% to 13%) change in volatility if all other market factors remain
constant.
See also
An option strategy executed by buying and selling options with different strikes but the same expiration.
See also
Volatility
A measure of the variation in the spot price.
See
also
The
pattern of implied volatility levels across the options of the same expiration.
W
Write
(an option)
Sell an option.