A market maker or liquidity provider is a company, or an individual, that quotes both a buy and a sell price in a financial instrument or commodity held in inventory, hoping to make a profit on the bid-offer spread, or turn. The U.S. Securities and Exchange Commission defines a ‘“market maker’” as a firm that stands ready to buy and sell stock on a regular and continuous basis at a publicly quoted price.
A bear call spread is where a call is sold close to the current underlying price and the risk is fixed by purchasing another call with a higher strike price. A bear put spread is where a put is purchased close to the current underlying price and lower strike put is purchased to reduce the trade cost. [click to read more]
Beta is a numerical value that defines the correlation of one asset against another asset. Options traders often beta weight their portfolio to the SPY in order to have a consistent comparison across all positions.[click to read more]
The price of the underlying stock where the options position would return neither a profit nor a loss. It's used to determine the profit range and loss range of the position and important for calculating the probability of profit..[click to read more]
It's a strategy where higher strike calls or puts are sold and lower priced calls/puts are purchased respectively, so that if the the security is to go up, the position will profit.[click to read more]
A sudden rise in prices of a security or market, due to many traders taking bullish positions, and then followed by sudden change of direction to the downside that traps the inexperienced trader in wrong side of the trade.[click to read more]
It's a type of Butterfly Spread where risk/reward profile is skewed in favor of the trader by which no losses occur or a slight credit is taken even if the underlying security goes down substantially. The strategy profits the most if the underlying price appreciates wit[click to read more]
It's a type of Condor Spread where risk/reward profile is skewed in favor of the trader by which no losses occur or a slight credit is taken even if the underlying security goes down substantially. The tradeoff is that if the underlying appreciates beyond the expected [click to read more]
A fully covered short put option by cash is known as Cash Secured Put". It involves writing an at-the-money or out-of-the-money put option and simultaneously setting aside enough cash to buy the stock. Bullish investors profit if the option expires out of the money or [click to read more]"