Options Glossary

Options Trading Glossary

Bust the lingo found in Options Trading Tools, Education, and Software with OptionAutomator's Options Trading Glossary

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  • a
  • Accumulation
    When stocks begin to trade in a range after dropping or rising drastically due to investors taking profits at the new price.[click to read more]
  • Adjusted Options
    A non-standard stock option whose price is tailor made to price in any substantial expected move in the underlying stock's capitalization.[click to read more]
  • All-or-None (AON) Order
    An AON is a type of order which is only executed if it can be filled completely. There need to be enough shares available to fill the order entirely, otherwise, the order is canceled.[click to read more]
  • American-Style Option
    An American-Style Option is a standard option contract which can be exercised by the option holder or option buyer at any time before the expiration date of the contract. Most of the exchange options are American-Style.[click to read more]
  • Annual Return on Capital
    The maximum potential return against the capital required (margin requirement) for the trade and then annualized for consistent comparison basis across setups with different duration.
  • Annual Return On Risk
    Annualized Return on Risk is calculated by taking the maximum possible return from the position divided by the notional risk (max loss) that could be realized in the trade. This return is then annualized for the year.
  • Annualized Return on Capital
    The maximum potential return against the capital required (margin requirement) for the trade and then annualized for consistent comparison basis across setups with different duration.
  • Annualized Return on Risk
    Annualized Return on Risk is calculated by taking the maximum possible return from the position divided by the notional risk (max loss) that could be realized in the trade. This return is then annualized for the year.
  • Arbitrage
    Theoretically, a risk-free strategy where financial instruments are bought and sold simultaneously to benefit from price differences. [click to read more]
  • AROC
    The maximum potential return against the capital required (margin requirement) for the trade and then annualized for consistent comparison basis across setups with different duration.
  • AROR
    Annualized Return on Risk is calculated by taking the maximum possible return from the position divided by the notional risk (max loss) that could be realized in the trade. This return is then annualized for the year.
  • ask price
    Pricing options are different price options relating to options contracts. [Click to read more]
  • Ask Price
    The ask price is the most competitive price of stock or an option at which a seller is willing to sell. Conversely, this is the price that the stock or option may be purchased at when a market order is used. [click to read more]
  • Assign
    Shares are assigned when the option contract holder (buyer) exercises their right to either purchase or sell shares at the agreed strike price. The assignment is sent to the seller who must fulfill the obligation. [click to read more]
  • at the money
    The relative comparison strike price of any given option contract as compared to the current price of the underlying financial instrument. The moneyness of an option is whether an option is in-the-money, at-the-money or out-of-the-money.[click to read more]
  • At The Money
    An option is at-the-money (ATM) when it's strike price is equal (or is the contract with the strike closest) to the current price of the underlying stock/ETF. [click to read more]
  • atm
    An option is at-the-money (ATM) when it's strike price is equal (or is the contract with the strike closest) to the current price of the underlying stock/ETF. [click to read more]
  • Auto-trading
    This is a three-party agreement by which your options' broker executes trades recommended by your options' advisory service.[click to read more]
  • Automatic Exercise
    The exercise of an in-the-money option by the clearing firm (Options Clearing Corporation) as a measure of protection for the holder of the expiring option. It can be compared to an insurance policy for the option holder.[click to read more]
  • b
  • Barrier Options
    Barrier options are also considered to be 'exotic' since these options' availability depends on whether specific price points have been reached or have been exceeded. [click to read more]
  • Bear Spread
    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]
  • Bear Trap
    A bear trap encourages bearish traders to place shorts on stock options since they expect the underlying prices to go down. But this doesn't happen. Instead, it either stays the same or starts increasing.
  • Bearish
    A trader or options position is bearish if it profits when either the market or the underlying price falls. [click to read more]
  • Bearish Options Strategies
    A technique of using options in multiple ways to gain profit from underlying stock when it is moving downwards. It is necessary to identify how far the stock will go down and the time frame during which the decline will happen in order to select the optimum trading stra[click to read more]
  • Beta
     
  • Beta (SPY)
     
  • Beta Weight
     
  • Beta Weight (SPY)
     
  • Beta Weighting
     
  • bid
    The bid price is the most competitive price for a stock or an option at which a buyer is willing to purchase the asset. Conversely, this is the price that the stock or option may be sold at when a market order is used. [click to read more]
  • bid price
    Pricing options are different price options relating to options contracts. [Click to read more]
  • Bid-Ask Spread
    The difference between the bid price and ask price which indicates how close the buyers and sellers are to an average price. Liquid stocks and options have small (tight) bid/ask spreads, which ensures good pricing and a future market to close the position.
  • Bid price
    The bid price is the most competitive price for a stock or an option at which a buyer is willing to purchase the asset. Conversely, this is the price that the stock or option may be sold at when a market order is used. [click to read more]
  • Bid/Ask Spread
    The difference between the bid price and ask price which indicates how close the buyers and sellers are to an average price. Liquid stocks and options have small (tight) bid/ask spreads, which ensures good pricing and a future market to close the position.
  • Bid/Ask Spread
    It's the difference between the bid and ask price offered. Liquid contracts or contracts with a higher trading volume mostly have a tighter Bid/Ask spread, and a contract that has a lower trading volume generally have more room between the Bid and Ask price.[click to read more]
  • Binary Options
    These are the options which gives investor zero or fixed return when they end in the money on expiration. OptionAutomator does not deal with binary options nor plans to include binary options support in future releases.[click to read more]
  • Black-Scholes
    The Black Scholes or Black Scholes Merton model is a mathematical model used to estimate the price of European Style derivatives, including options contracts. The model forms the basis of the Black-Scholes formula, which can be rewritten in different forms to solve for various options trading parameters. [click to read more]
  • Box Spread
    This is an options trading strategy in which profit is made by arbitraging on discrepancies in options pricing. These spreads are usually four-legged and like other arbitrage opportunities are not suitable for retail traders.[click to read more]
  • Breadth
    Total number or stocks which are gaining versus the ones losing prices compared to last trading day. Whenever the gaining stocks outnumber the losing ones, the market Breadth becomes positive and vice-versa.[click to read more]
  • break even price
    The Break-Even Price is the price at expiration which either a single contract or a spread will have neither any loss or gain for both the option(s) buyer and the option(s) seller.
  • Break Even Point
    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]
  • Break-Even Price
    The Break-Even Price is the price at expiration which either a single contract or a spread will have neither any loss or gain for both the option(s) buyer and the option(s) seller.
  • Breakout
    When a range bound stock starts to trade above the top resistance level or previous bottom support level of the range. Many times the trend continues in the breakout direction.[click to read more]
  • Broken Wing Butterfly Spread
    A type of butterfly spread which is skewed to create reward in a single direction within a current range and has risk if the underlying moves in the correct direction, but beyond the expected move implied by current option prices. This is achieved by setting up a normal butterfly spread but then skipping, or moving further out of the money, the final protective put or call. [click to read more]
  • Bull Call Spread
    A strategy with an upfront cost (debit) that profits if the underlying (stock) rises in price. This spread involves buying two calls with the same expiration date, but with a different strike price. A bull call spread aims to reduce the upfront cost of buying call options in order to profit from stocks that are expected to rise moderately. [click to read more]
  • Bull Spread
    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]
  • Bull Trap
    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]
  • Bullish
    If the option buyer thinks the price may rise. The rise may be in general market or that of any stock chosen. The trader with this view can be called bullish". A market trending higher is often called "bullish" or a "bull market"[click to read more]"
  • Bullish Options Strategies
    Options' trading strategies in which profits are targeted when underlying's prices are moving up.[click to read more]
  • Butterfly Spread
    A strategy of combining bull and bear credit spreads to minimize the risk with the short option of each spread on a single strike price. The profit is also limited due to the increased probability of the trade to profit. Put's or calls can be used for this strategy.[click to read more]
  • Buy To Open
    It's the execution of a purchased, long options position.[click to read more]
  • c
  • Calendar Spread
    It's an option trading strategy in which different options are combined with different expiry dates to take advantage of accelerated time decay of premiums in the front month compared to the back month.[click to read more]
  • Calendar Strangle
    Similar to a calendar straddle. A calendar strangle involves buying a long term strangle and selling a short term strangle simultaneously. This is a neutral options' trading strategy.[click to read more]
  • Call OI All Strikes
    The Call Open Interest All Strikes is the sum of open interest across all available strikes and expiration dates.
  • Call Broken Wing Butterfly Spread
    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]
  • Call Broken Wing Condor Spread
    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]
  • Call Open Interest All Strikes
    The Call Open Interest All Strikes is the sum of open interest across all available strikes and expiration dates.
  • Call Ratio Backspread
    A strategy buying more of the out of money calls than shorted at or in the money calls. This position has unlimited upside profit and small downside profit. The trade losses money if the underlying does not move at all and stays range bound.[click to read more]
  • Call Ratio Spread
    A strategy with the goal of profiting from most market condition: up, down, or range-bound by selling more out of the money calls than in the money call are purchased. The risk in this trade is if the underlying appreciates too quickly beyond the expected move implied [click to read more]
  • Call Time Spread
    A strategy in which at the money or near the money calls with higher premiums or puts are written and further dated calls/puts are bought at the same strike to take advantage of the accelerated time decay in premium in the front month[click to read more]
  • Call Volume All Strikes
    The Call Volume All Strikes is the sum of all call options volume across all available strikes and expiration dates. Volume is the number of contracts for a specific strike and expiration that traded hands.
  • Called Away
    When covered call options seller is forced to sell the underlying stock to the call buyer at strike price of the call option[click to read more]
  • Capitalization
    Capitalization is when the sum total of all the securities of a corporation over a longer period of time, is recognized. This includes the company's debt, profit, and fixed assets.[click to read more]
  • Cash Secured Put
    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]"
  • Cash Settlement / Cash Delivered
    When the right of an option was exercised by the investor, proceeds are delivered in a cash settlement rather than the underlying asset. The investor does not take physical possession of an underlying in this case, but conveniently receives a cash transfer equivalent to the strike price of the option.[click to read more]
  • CBOE
    CBOE, which stands for Chicago Board Options Exchange, is the original exchange that traded stock options on a national level. CBOE was founded in 1973. They are also the world's largest options exchange and a market leader in creating financial instruments for electronic trading. [click to read more]
  • chain
    The option chain organizes all options available for trading by expiration period and the strike price for an underlying security. Scouring option chains is a typical activity for any trader and require a great deal of time.[click to read more]
  • Chicago Board Options Exchange
    CBOE, which stands for Chicago Board Options Exchange, is the original exchange that traded stock options on a national level. CBOE was founded in 1973. They are also the world's largest options exchange and a market leader in creating financial instruments for electronic trading. [click to read more]
  • Class of Options
    Class Option is all the option contracts of the same type (call and put) and style (American or European), which falls under the same underlying asset. [click to read more]
  • Close
    Close is the end of the trading day when final market prices are calculated and financial transactions are concluded.[click to read more]
  • Closing Order
    The goal of a buying or selling closing order is for the order to be placed as close to the closing time and price for the day.[click to read more]
  • Condor Spread
    A condor spread is a range-bound neutral options trading strategy in which the trader takes advantage of time decay in the range-bound market.[click to read more]
  • Consolidation
    It's the common phenomenon in stock market or security's price movement, when the price goes nowhere and stays in between upper resistance and lower support levels, because of profit taking by investors after a large trending move.[click to read more]
  • Contango
    A typical market scenario, in which the implied volatility or price of the nearest month is lower than the corresponding implied volatility or price of longer duration contracts. This term was initially used in oil market.[click to read more]
  • Contingent Order
    An electronic order which a combination options is placed automatically when the trader's contingencies are met.[click to read more]
  • Contract Implied Volatility
    Implied Volatility [Contract] defines the individual contract's or spread's implied volatility. Implied volatility at a contract level is the volatility implied for the future by the contract's current pricing.
  • Contract IV
    Implied Volatility [Contract] defines the individual contract's or spread's implied volatility. Implied volatility at a contract level is the volatility implied for the future by the contract's current pricing.
  • Contract Mid Price
    The contract or spread mid price is the price between the bid and ask prices currently on offer for the option contract or the spread. This is a good target for a limit price placed on an options order.
  • Contract Neutral Hedging
    A hedging strategy in which one contract of call is sold and one contract of put is bought against the corresponding to one contract share held.[click to read more]
  • Contract Range
    The range of the highest and lowest price that the option contract has traded over its contract lifetime.[click to read more]
  • Contrary Opinion
    The opposite opinion on future price of a security. One who holds a contrary opinion to the trend of the security is referred to as a 'contrarian'.[click to read more]
  • Conversion
    The adjustment of a long stock position, by the use of any combination of options to make it short position of the stock without squaring off the original long position.[click to read more]
  • Correction
    The phase of small counter trend in a trending market due to profit taking by numerous traders[click to read more]
  • Cover
    To close or square off an open short option position. This involves a buy to cover" order to square off a short position. [click to read more]"
  • Covered Call Write
    A combination of stock and call option strategy where equivalent number of stocks are purchased as that of lot size of the call of the same stock written simultaneously. This is a very popular strategy for traders/investors transition from stock trading to options tradi[click to read more]
  • Covered Put Write
    A trading strategy in which a short put is hedged with short stock in order to neutralize risk to the downside. This is essential the opposite of a covered call or covered write and can be used when the trader is bearish on the underlying security.[click to read more]
  • Covered Return
    The covered return is an indication of the percent potential return against the notional risk, or the amount of money that may be required if all short contracts were exercised.
  • Covered Straddle Write
    A misnomer term (as it does not hedge the position completely) used when a straddle of the same underlying instrument is written against this open underlying instrument.[click to read more]
  • Covered Warrant
    A type of warrant that gives the right but not obligation to buy or sell specific amount the underlying financial product within predefined time period. Covered warrant is issued to behave exactly like call and put options. OptionAutomator's Brutus does not cover warra[click to read more]
  • Credit
    Credit is money received in the account from the trade of a single or combination of options where the premium you receive is greater than the debit you paid. It is very common to receive a credit when shorting (writing) an option contract.
  • Credit Spread
    An option spread strategy in which credit (premium) is received by trader through selling more premium than debit to be paid for long options in the same underlying stock but different strike prices or expiration dates.[click to read more]
  • Criteria Group
    A Group in your Brutus Options Ranker strategy gives you a way to organize similar criteria into a branch in your strategy tree. This keeps your strategy tree organized and allows you to assess the rank of the group by using sub-criteria.
  • d
  • 30 Day Implied Volatility [underlying]
    The 30 Day Implied Volatility [underlying] is the interpolated implied volatility forecasted over the coming 30 days for the underlying. This provides a VIX-type volatility measure to individual underlying.
  • Day trader / Daytrader
    A trader whose trades are executed and squared off within a single day time frame. Day traders are typically extremely active, completing multile round trip trades each day.[click to read more]
  • Day trading / Daytrading
    A trading style in which the trades are executed and squared off within a single day time frame. Day trading involves frequent trading activity.[click to read more]
  • Days to Expiration
    Days to Expiration gives the amount of time left in the option contract or in the nearest dated option in an options spread.
  • Debit
    The money deducted from an options trading account to establish an options trade. This is created by purchasing higher premium amount and/or selling lower premium amount and is usually used to speculate on direction of the underlying.[click to read more]
  • Debit Spread
    An options trading spread in which money goes out of the account to execute the trade. In this strategy the premium paid in purchased options is more than the premium received in written options.[click to read more]
  • Deliverables
    The underlying security that is delivered to the buyer of options if the buyer decides to exercise their options position(s). These deliverable are assigned to the option writer in electronic or physical assets.[click to read more]
  • Delta
    "Delta" is the most commonly quoted Greek word that determines the change in option price in correspondence to the change in the underlying security's price. [click to read more]
  • Delta Neutral
    An options trading strategy in which the effect of delta is neutralized by combining options with positive delta and options with negative delta to get a complex position that remains same in value provided there is no huge abrupt directional move. The position's delta[click to read more]
  • Delta Spread
    A combination trade that may involve trading of Stocks, Options and/ or futures that neutralizes the overall Delta of the position.[click to read more]
  • Derivatives
    A financial instrument whose price is partly or fully dependent on the security from which it's derived from. Examples of derivatives are options, futures and warrants.[click to read more]
  • Diagonal Call Time Spread
    A call options trading strategy in which a neutralized position is established by writing high premium near month out of the money calls and buying simultaneously further month at the money call option contracts to take advantage of time decay of near term calls. The mo[click to read more]
  • Diagonal Spread
    An option trading strategy, in which combination of options of same type , different expiry months and different strike prices but with the same underlying asset, are traded as a spread.[click to read more]
  • Discount Broker
    A brokerage house that provides traders very low commissions.[click to read more]
  • Dividend
    An amount of money or options paid by a corporation to its current shareholders.[click to read more]
  • Downside Protection
    The hedge or risk reduction provided by a position as compared to owning/shorting the underlying stock outright. This is a common term in buy-write (covered call) and short put strategies.[click to read more]
  • DTE
    Days to Expiration gives the amount of time left in the option contract or in the nearest dated option in an options spread.
  • Dynamic Hedging
    A Hedge that needs to be adjusted often as time passes to maintain a hedge ratio.[click to read more]
  • e
  • Early Exercise (assignment)
    The assignment of underlying stock to the seller of option by the option buyer through executing his right to exercisean before it's expiry date. Only American-style options are subject to early exercise, while European-style options are not.[click to read more]
  • Employee Stock Options
    Special stock options, generally long term options, generated by the company and granted to encourage, retain, attract or compensate them.[click to read more]
  • Equity Option
    The option whose underlying asset is publically traded stock of a corporation.[click to read more]
  • ETF
    The Exchange Traded Funds that replicate a target index's performance (e.g., S&P 500 or commodities, foreign markets, etc). ETFs trade like stock, have lower fees than mutual funds, and many have tradable options.[click to read more]
  • European Exercise
    The style of an option that limits the exercise to its expiry only and can not be exercised any other time during the life cycle of an option. There is advantage to the writer of option in this type of feature as the writer can be sure that there would not be any early [click to read more]
  • Ex-Dividend Date
    The last date to record the holders of the stock for dividend payment.
  • Exercise
    The process of execution of his rights by the option buyer to assign or call away the underlying asset to the option seller. The exercise can mean to buy the underlying asset in case of call option exercise or sell it in case of put options.[click to read more]
  • Exercise Price
    The price level at which the option buyer has the right to buy or sell the underlying security. This is known as the strike price of the option and is fixed for the option's life.[click to read more]
  • Expected Return
    Return expected from a security investment over a specific period of time, calculated by taking into account certain historical price movement variable. It is based on the concept of history and stock price movement repeats itself to a reasonable extent.[click to read more]
  • Expiration
    Expiration is the date that the option contract expires. All options contracts are valid for a fixed duration. This is the lifespan of the option where the buyer has the right to exercise the option and the seller has the obligation to fulfill the terms of the option. [click to read more]
  • Expiration Date
    A predefined fixed date after which a specific option can not be traded. Open option contracts are squared off in cash or assignment at the end time of the expiry day automatically by the brokers.[click to read more]
  • Expiration Time
    A time of the options expiration date after which open option contracts can not traded and are void by either automatic assignment or cash settled square off.[click to read more]
  • Expire Worthless
    Option that expires without any value. Any option that is not In The Money" at the time of expiration of the contract becomes worthless at expiration.[click to read more]"
  • Extrinsic Value
    Extrinsic value is also known as time value. The amount of time remaining in the option is a key value for pricing and determines how long the underlying has to move up or down at current or future volatility.
  • f
  • Fair Value
    The worth of an option as calculated by an accepted mathematical model. The most common pricing model is the Black Scholes model.[click to read more]
  • Financial Instrument
    An electronic or paper document that gives the right to own Stocks, futures and options or commodities etc.[click to read more]
  • Front Spreads
    The options strategy in which call and/or put options are traded by selling more options than buying to get a net credit spread so as to take advantage of time decay of options in a range bound expected market.[click to read more]
  • Fundamental Analysis
    A very common analysis used by long term stock investors to filter best candidates for investment through analyzing the accepted accounting measures like PE multiples, earnings, promoters, sales, assets, balance sheets, income statements etc. [click to read more]
  • g
  • Gamma
    Gamma is an Options Trading Greek which determines the rate of change in option's delta with a 1-point move in the underlying asset. I.e., Gamma describes how Delta is expected to change with moves in the underlying (stock).
  • Gamma Neutral
    A strategy in which the Gamma of the trade is made zero so that the price movement of underlying stock has no-effect whatsoever on Delta of the options held[click to read more]
  • Going Forward
    The term used by analysts to indicate expectations in the future.[click to read more]
  • Good Until Canceled (GTC)
    A type of order which is not cancelled automatically and can be placed to execute a trade over a multitude of days.[click to read more]
  • Greeks
    The different factors involved in mathematical calculation of option prices.[click to read more]
  • Grocession
    It's a investor's perceived recession (not recession") when the positive GDP growth is between 0 to 2% for prolonged periods of time. This period generally frustrates investors because of stagnation in growth and feels like recession.[click to read more]"
  • Group
    A Group in your Brutus Options Ranker strategy gives you a way to organize similar criteria into a branch in your strategy tree. This keeps your strategy tree organized and allows you to assess the rank of the group by using sub-criteria.
  • h
  • Hedge
    A risk neutralizing position taken usually in futures and options market in reverse direction, to offset any risk in the original open trade.[click to read more]
  • Hedge Ratio
    The Calculated numbers that equals the delta of a given option. This ratio is calculated for a trade to hedge a a trading position with the same number of opposite financial instruments [click to read more]
  • Historical Volatility
    The past measurement of the volatility of any security over a given timeframe.[click to read more]
  • Horizontal Call Time Spread
    An options trading strategy utilized when a trader expects a future range bound market. In this strategy At The Money call contracts of near month are sold and a further month's calls are purchased to take advantage of net time decay value of premiums[click to read more]
  • Horizontal Spread
    Any options strategy which has options of different expiry but same striking prices.[click to read more]
  • i
  • Implied Volatility (Contract)
    Implied Volatility [Contract] defines the individual contract's or spread's implied volatility. Implied volatility at a contract level is the volatility implied for the future by the contract's current pricing.
  • Implied Volatility Percentile
    Implied Volatility (IV) Percentile is a measure used to compare the underlying's current IV (as an average of all available options contract pricing) to historic values, which range defaults to the past year.
  • Implied Volatility
    The implied volatility of an option contract is an estimation of contracts volatility based on the current trading price. The more expensive the option, the higher the implied volatility. Implied volatility gives the trader a sense if the contract is relatively cheap or expensive.
  • Implied Volatility [Contract]
    Implied Volatility [Contract] defines the individual contract's or spread's implied volatility. Implied volatility at a contract level is the volatility implied for the future by the contract's current pricing.
  • in the money
    The relative comparison strike price of any given option contract as compared to the current price of the underlying financial instrument. The moneyness of an option is whether an option is in-the-money, at-the-money or out-of-the-money.[click to read more]
  • In the Money
    When the underyling asset upon which the option has a higher price (in the case of a call) or a lower price (in the case of a put) than the strike price of the option.[click to read more]
  • Incremental Return Concept
    Utilizing multiple covered calls over the duration a stock is held to take advantage of the time premium of call options while the investor maintains intent to sell the stock at higher prices.[click to read more]
  • Index
    An index is a measurement of the sum total of prices calculated with a weighting of different percentages among a group of stocks, to provide an indication and consistent measure of the overall market performance. [click to read more]
  • Index Option
    A derivative on an index product that gives the holder the right, but not the obligation, to buy or sell a basket of stocks depending on if the investor is holding call or put respectively. Index options are typically settled in cash basis only.[click to read more]
  • Intrinsic Value
    Intrinsic Value is the portion of the option's price attributed to the contract already being in the money.
  • IV Percent
    Implied Volatility (IV) Percentile is a measure used to compare the underlying's current IV (as an average of all available options contract pricing) to historic values, which range defaults to the past year.
  • IV Percentile
    Implied Volatility (IV) Percentile is a measure used to compare the underlying's current IV (as an average of all available options contract pricing) to historic values, which range defaults to the past year.
  • l
  • Last Trading Day
    The last day of the options period of validity and the last day to trade the option before automatic assignment or worthless expiration. The third Friday of the expiration month of options is the last trading day for regular monthly options.[click to read more]
  • LEAPS
    Long-Term Equity AnticiPation Securities. These options have expiration dates of 1 year or more.[click to read more]
  • Leg
    Part of an option position that is established of two or many parts (legs).[click to read more]
  • Leg (Noun)
    Each option type is known as a leg in a complex option strategy that is constituted by different kind of options.[click to read more]
  • Level II Quotes
    The real time quotes without any delay and details the specific bid-ask spread provided by each market maker. These quotes are typically only available to elite big investors and traders willing to pay for the data stream subscriptions.[click to read more]
  • Leverage
    An increased exposure to profit and risk without the use of additional cash by the investor or trader. Options are inherently levered instruments as they control 100 shares of stock for a fraction of the overall execution price.[click to read more]
  • Limit Order
    An order that is placed in the market to be executed at a set price. If the set price is not reached in the market, this type of order never gets filled. It is wise for traders to use limit orders when the option contract has a wide bid-ask spread and/or low liquidity.[click to read more]
  • Liquid / Liquidity
    The characteristic of high volume of trades in an option so as to be able to easily square of any held position in that option at reasonable market price. Volume and the width of the bid-ask spread are good idications of overall contract liquidity. [click to read more]
  • Listed Option
    An option (call or put option) that has fixed exercise price (strike price) and fixed expiration date, which is traded in registered options exchange.[click to read more]
  • Long
    To purchase and hold a security. Traders profit from long positions when prices appreciate.[click to read more]
  • long position
    A 'position' is any open trade in a portfolio. [click to read more]
  • m
  • Margin (options)
    The minimum amount of cash or security equity required by the broker to open a particular option contract.[click to read more]
  • Margin (stocks)
    The facility provided by the broker to buy more stocks on loan provided to the investors by broker. With margin the investor may purchase and hold more stocks than would be possible if the positions were purchased with cash.[click to read more]
  • Marked-To-Model
    A valuation mechanism for level 2 securities which are generally not liquid. Valuation of these less liquid securities is very difficult because of non-availability of liquid market for them.[click to read more]
  • Market Capitalization
    Market Capitalization, also called 'Market Cap' for short, is the total value of outstanding shares for the Underlying.  Market Cap describes the value of the company or the size of an ETF's assets under management.
  • Market Maker
    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.
  • Market On Close
    An Option order that executes at or near the closing time of market.[click to read more]
  • Market Order
    A type of order which finds nearest best price in the market and fills the order immediately at best available price. These types of orders should not be placed on security with wide bid-ask spreads.[click to read more]
  • Married Put and Stock
    A hedging strategy in which a neutralized trading position is established by buying stock and a put option on the same day.[click to read more]
  • MCDA
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • MCDM
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Mid Price Underlying
    The underlying mid-price is the price between the bid and ask prices currently on offer for the stock or ETF. This is a good target for a limit price placed in any order that involves the underlying stock.
  • Mid Price
    The Mid Price is the price between the bid and ask prices currently on offer for either an underlying security or option contact/spread. This is a good target for a limit price placed in any order that involves the underlying stock.
  • Mid Price [Options]
    The contract or spread mid price is the price between the bid and ask prices currently on offer for the option contract or the spread. This is a good target for a limit price placed on an options order.
  • Mid Price [Underlying]
    The underlying mid-price is the price between the bid and ask prices currently on offer for the stock or ETF. This is a good target for a limit price placed in any order that involves the underlying stock.
  • Mini Index Options
    The tailor made index option contracts for small investors, whose lot size is tenth the size of the standard lots of index.[click to read more]
  • Mini Options
    The tailor made stock option contracts for small investors, whose lot size is tenth the size of the standard lots of the stock options.[click to read more]
  • Model
    Any one of the mathematical formulas used to fairly price an option contract as a result of many factors, including: the underlying security's prevailing price, beta, Implied Volatility, time to expiry, dividends expected, current risk free interest rate, etc.[click to read more]
  • Moneyness
    The relative comparison strike price of any given option contract as compared to the current price of the underlying financial instrument. The moneyness of an option is whether an option is in-the-money, at-the-money or out-of-the-money.[click to read more]
  • Multi-Criteria Decision Analysis
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multi-Criteria Decisions Making
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple Criteria Decision Analysis
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple Criteria Decisions Making
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple Compression
    The reduction of Price to Earnings Ratio (PE multiples) by negative market growth sentiments in different traded markets in a given time frame.[click to read more]
  • Multiple-Criteria Decisions Analysis
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple-Criteria Decisions Making
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple-Criteria Decision Making
    Multiple-Criteria Decision Making (MCDM) is a field of mathematics that explicitly analyzes multiple conflicting criteria in decision making. The Brutus Options Ranker uses proprietary adoption of MCDM to rank daily options trades against investors custom trading strategies.
  • Multiple Expansion
    The overall rise in markets which usually result in increase in PE Ratios of the stocks because of positive sentiments present in market participants due to tremendous positive change in growth of assets.[click to read more]
  • n
  • Naked Option
    A sold option position without any accompanied position in underlying financial instrument.[click to read more]
  • Narrow Based
    An index that is constituted by very few number of security and usually focused on stocks in a particular industry.[click to read more]
  • NASDAQ
    An American stock exchange focused primarily on technology companies. The acronym NASDAQ stands for National Association of Securities Dealers Automated Quotations[click to read more]
  • Natural-Mid Spread
    The Natural-Mid Spread for an options contract or spread is the difference in percentage terms between the natural price and the mid-price. The difference between the natural indicates the liquidity of the trade.
  • Near The Money
    Options with strikes closest to the prevailing price of it's underlying security.[click to read more]
  • Net-Long Setups
    A Net-Long Setup is any options trading position which has a higher value of long contracts vs. short contracts in your spread.
  • Net-Short Setup
    A Net-Short Setup is any options trading position which has a higher value of short contracts vs. long contracts in your spread. When these positions are opened, the trader will be paid a credit.
  • Neutral
    Neutral Options Spread is a combination of options trades that does not profit from big moves either upside or downside but it's designed to take advantage of the range bound market and generates profits if stock remains in a range.[click to read more]
  • Neutral Options Strategies
    Options strategies that use options to profit from range bound stocks, generally by taking advantage of the time decay of written options.[click to read more]
  • Non-Equity Option
    An option contract whose underlying asset is not a stock but some other kind of financial instrument like commodity or any index.[click to read more]
  • Notional Value
    Notional Risk, sometimes called Notional Value, is the total risk of a derivatives contract. [click to read more]
  • Notional Risk
    Notional Risk, sometimes called Notional Value, is the total risk of a derivatives contract. [click to read more]
  • o
  • One Sided Market
    A uni-directional trending market where there are either more very high volume buyers or more very high volume sellers whose trading activity maintain the security's trend[click to read more]
  • open interest
    The Put Open Interest All Strikes is the sum of open interest across all available put option strikes and expiration dates.
  • open trade
    A 'position' is any open trade in a portfolio. [click to read more]
  • Open Interest
    Open Interest indicates the number of all open options contract for the particular option. This is an important measure of liquidity as it indicates the overall active participation in the position. High open interest, or high participation, in the options contract gives the trader reasonable confidence that there will be a counterparty for closing or for adjusting the position over the contract life.
  • Call Option
    A call option, often simply labeled a "call", gives the buyer the right, but not the obligation, to buy assets at a certain price before the expiry date of an option contract. [click to read more]
  • Option Mid Price
    The contract or spread mid price is the price between the bid and ask prices currently on offer for the option contract or the spread. This is a good target for a limit price placed on an options order.
  • Option Pain
    Th price point of a stock at which most of the options expires out of the money, therefore causing maximum pain for the option buyers.[click to read more]
  • Option Pricing Curve
    The options price curve created on a graph by plotting option's price against period of time passed. This curve, created by a mathematical model, is important for option traders as it depicts the time value at different fixed points in time.[click to read more]
  • Option Trader
    The trader who buys and sells call and put options in the options market.[click to read more]
  • Option Trading
    The opening and closing of trades in index and stock options that provides opportunity for traders to get leverage for their trades, insure their stocks, or to hedge against risk, and create synthetic positions which can most accurately express their market view.[click to read more]
  • Option Volume
    The Option Volume is the specific volume for an exact contract. Volume is the number of contracts for a specific strike and expiration that traded hands.
  • options chain
    The option chain organizes all options available for trading by expiration period and the strike price for an underlying security. Scouring option chains is a typical activity for any trader and require a great deal of time.[click to read more]
  • Options Mid Price
    The contract or spread mid price is the price between the bid and ask prices currently on offer for the option contract or the spread. This is a good target for a limit price placed on an options order.
  • Options Spread
    Setups are a specific combination of options contracts that matches a strategic objective. Setups are sometimes referred to as spreads or "strategies" (not to be confused with a Brutus Options Ranking strategy).
  • Options Chains
    An organized list of tradable put and call options by expiration date and strike price.[click to read more]
  • Options Clearing Corporation (OCC)
    The corporation responsible for issuance, clearance, and settlement of all the listed options of the National Option Exchanges.[click to read more]
  • Options Contract
    A derivative contract that gives the right, but not the obligation to the buyer, to buy or sell a specific stock (underlying) at an agreed price before the specified expiry date of the contract. [click to read more]
  • Options on Futures
    Option contracts where the underlying financial instrument is a futures contract.[click to read more]
  • Options Strategist
    A professional trader who is expert in analysis of various options strategies.[click to read more]
  • Options Symbol
    The short name of the option contract to identify a particular option contract in the market or ticker. This is the short unique code for the option contract. [click to read more]
  • Options Trading
    Options trading is the activity of buy and selling standardized equity options contracts. Options trading is unique to stock trading in two main ways. [click to read more]
  • out of the money
    The relative comparison strike price of any given option contract as compared to the current price of the underlying financial instrument. The moneyness of an option is whether an option is in-the-money, at-the-money or out-of-the-money.[click to read more]
  • Out of the Money
    An option is 'out of the money' in two different scenarios: First, a call option is out of the money when the contract has a strike price higher than the current market price of the underlying stock. Second, an Out of The Money put has a strike lower than the current m[click to read more]
  • Over-the-Counter Option (OTC)
    An option that is traded by direct interaction of buyer and seller, who mutually negotiate the premium, strike price and expiration dates as of their mutual liking.[click to read more]
  • Overvalued
    A description of an option contract when the prevailing price of the option, or any given financial instrument, is higher than the fair value of the option. This term is often used by traders to express their view of the future price of the security. I.e., if an optio[click to read more]
  • p
  • Parity
    The fair convertible price point of an option that represents market value of underlying stock.[click to read more]
  • Physical Option
    The option that has physical commodity as underlying security and not a stock or futures. These types of options are outside the analysis scope of OptionAutomator's Brutus, your personal option quant in the cloud.[click to read more]
  • Physically Settled Option
    An option that, if exercised has the mandatory assignment of actual physical underlying financial instrument like real stocks, gold, copper, rice etc. [click to read more]
  • POP
    Probability of Profit (POP) measures the chance that the underlying positions price at expiration will produce at least $0.01 of profit in the options position.
  • Portfolio
    It's the overall list of all the investments made by an investor. A portfolio can have investments like shares, debts, futures, options, commodities etc.[click to read more]
  • Position
    A 'position' is any open trade in a portfolio. [click to read more]
  • Position Trading
    A general term in which strategy is utilized to take advantage of option's decaying premium associated with time value, implied volatility, neutralized spreads and arbitrage opportunities with a goal to make a reasonable and consistent return on investment.[click to read more]
  • POT
    Probability of Touch measures the chance that an option’s strike price will be “touched” by the stock price before expiration.
  • Premium
    The premium is the price of an option contract.[click to read more]
  • Options Pricing
    Pricing options are different price options relating to options contracts. [Click to read more]
  • Probability ITM
    Probability ITM is the chance for an options asset to remain above the price of a call or stay below the price of a put’s strike price at expiration.
  • Probability OTM
    Probability OTM is the chance for an options asset to stay below the price of a call or stay above the price of a put’s strike price at expiration.
  • Probability In-The-Money
    Probability ITM is the chance for an options asset to remain above the price of a call or stay below the price of a put’s strike price at expiration.
  • Probability of Profit
    Probability of Profit (POP) measures the chance that the underlying positions price at expiration will produce at least $0.01 of profit in the options position.
  • Probability of Touch
    Probability of Touch measures the chance that an option’s strike price will be “touched” by the stock price before expiration.
  • Probability Out-of-The-Money
    Probability OTM is the chance for an options asset to stay below the price of a call or stay above the price of a put’s strike price at expiration.
  • Profit Range
    Any price at which the position shows a profit in the profit and loss graph. Generally the profit range is any price in between the upside break-even point and downside Break-even point [click to read more]
  • Protected Strategy
    A type of trading strategy that is hedged with options and futures so as to make it a very small risk trade. The stock holdings can be protected by buying corresponding number of puts of the same stocks so as to protect the investment in case the market falls down subst[click to read more]
  • Protective Call
    A commonly used hedging strategy for short sellers that involves purchase of call contracts against the short position held in the underlying asset. This strategy protects any risk involved due to an upside move in the underlying asset.[click to read more]
  • Protective Put
    Risk covering strategy to protect downside risk in long stocks by purchasing put against it. Although this does provide a portfolio hedge, performance has shown to be very poor due to the high hedging cost when buying the protective put(s).[click to read more]
  • Public Book (of orders)
    The entries of all the orders placed by public to buy and sell companies shares.[click to read more]
  • Pull back
    A small fall in prices, generally of 3 to 5 days following a big trending move in bull market due to profit taking by traders. The trend needs to continue upward to constitute a pull back. Otherwise, this price action would be considered a top.[click to read more]
  • Put Broken Wing Condor Spread
    A neutralized condor spread strategy position in which risk of directional move is covered by buying further strike out of the out of the money puts than a standard put condor.[click to read more]
  • Put Call Parity
    The fair Call and put pricing policy in prices so that the markets are not taken advantage of through price discrepancy arbitrage. Arbitrage opportunities are extremely rare as many hedge funds have extremely fast servers located in close proximity to primary exchanges [click to read more]
  • Put Call Ratio
    The ratio arrived by dividing the total number of puts traded with the total number of calls traded in the market. If put call ratio is higher than 1 that means more puts are being traded (bought or sold) than calls.[click to read more]
  • Put Open Interest All Strikes
    The Put Open Interest All Strikes is the sum of open interest across all available put option strikes and expiration dates.
  • Put Option
    A put option contract gives the owner the right (but not the obligation) to sell 100 shares of the asset at the strike price any time before expiration. If you sell a put option, you have the obligation to purchase those 100 shares from the owner.
  • Put Ratio Backspread
    An option trading strategy in which credit is received by the trader by writing some In The Money (ITM) or At The Money (ATM) puts against buying more Out of The Money (OTM) puts. With this strategy most gains are made if the underlying stock breaks to downside, and lim[click to read more]
  • Put Ratio Spread
    An option strategy which makes money if the underlying decreases in price within an expected range and experiences a loss if the underlying decreases in price beyond the expected range. This position is created by buying an In The Money (ITM) or At The Money (ATM) put [click to read more]
  • Put Volume All Strikes
    The Put Volume All Strikes criterion is the sum of all put options volume across all available strikes and expiration dates. Volume is the number of contracts for a specific strike and expiration that traded hands.
  • q
  • Quadruple Witching
    Term used for every third Friday or March, June, September and December. Volatility generally increase drastically on these days as these days are expiration days of Index futures and options, Stock Futures and Options.[click to read more]
  • Quarterlies / Quarterly Options
    The Options that has quarterly expiration cycles vs. monthly expiration cycles.[click to read more]
  • r
  • Ratio Calendar Combination
    An options trading strategy in which a simultaneous trades of a ratio calendar spread using calls and a position using puts, where the striking price of the calls is greater that the striking price of the puts.[click to read more]
  • Ratio Calendar Spread
    An option strategy which makes money if the underlying decreases or increases in price within an expected range and experiences a loss if the underlying decreases or increases in price beyond the expected range. This position is created by buying an In The Money (ITM) [click to read more]
  • Ratio Spread
    The option trading strategy in which disproportionate number of options contracts of same underlying and same expiration dates are bought and sold with different strike prices[click to read more]
  • Ratio Strategy
    A strategy in which disproportionate number of short and long securities are traded to skew the risk-reward ratio in line with the trader's market view on future price movement.[click to read more]
  • Ratio Write
    A type of covered call in which the risk is increased by writing more calls than the purchased stock.[click to read more]
  • Realize (a profit or loss)
    The squaring off of a position to close it in profit or loss. The profit or loss is realized as soon as the trade is closed.[click to read more]
  • Resistance
    A line in the technical price chart of a security which is tested by the price but finds it very difficult to cross time and again. This happens due to the profit taking at this level. The supply suddenly increases at resistance level because of which stock fails to ris[click to read more]
  • Return
    Return is the expected or potential profit that can be realized by an options trade.
  • Return If Exercised
    The profit or return a covered call writer would make if the underlying security is called away and indicates the max return possible to the buy-write investor from appreciation of the underlying shares. In most cases this is equivalent to the maximum return possible fo[click to read more]
  • Return on Capital
    The maximum potential return against the capital required (margin requirement) for the trade.
  • Return On Investment (ROI)
    The net return made on an investment after expenses calculated in percentage terms for a given timeframe.[click to read more]
  • Return on Risk
    Return on Risk simply measures the maximum potential return for an options setup divided by the maximum potential loss.
  • Reversal
    A option trading strategy in which combination of options are traded to exactly reverse the payoff of a short open position in a stock, without buying back the initial stock position. This new position is called a synthetic long stock.[click to read more]
  • Reward / Risk Ratio
    The trader's measure of riskiness of the trade. This ratio is the ratio arrived after dividing the expected profit amount with the expected loss amount if the stop loss point is reached.[click to read more]
  • risk-free rate
    The Risk-free interest rate is the return on investment with no loss-of-capital risk. In practice, this does not exist. In theory, it is an important parameter in option pricing as it sets the baseline price upon which risk premium should be added. A practical estimate to the risk-free interest rate is taken from 'risk-free' bond issued by the government or agency where the default risk is practically zero.
  • risk-free rate of return
    The Risk-free interest rate is the return on investment with no loss-of-capital risk. In practice, this does not exist. In theory, it is an important parameter in option pricing as it sets the baseline price upon which risk premium should be added. A practical estimate to the risk-free interest rate is taken from 'risk-free' bond issued by the government or agency where the default risk is practically zero.
  • Risk-free Interest Rate
    The Risk-free interest rate is the return on investment with no loss-of-capital risk. In practice, this does not exist. In theory, it is an important parameter in option pricing as it sets the baseline price upon which risk premium should be added. A practical estimate to the risk-free interest rate is taken from 'risk-free' bond issued by the government or agency where the default risk is practically zero.
  • Risk Free Return
    The minimum expected return by an investor from risk free financial investments like treasury bills. This rate is considered when comparing alternate strategies and products to assess the incremental return potential associated with the additional risk in the position. [click to read more]
  • Risk Graph
    A graph that displays risk and reward parameters for different price ranges of an option strategy.[click to read more]
  • Roll Down
    A management technique on open options positions in which a higher strike option trade is replaced with a lower strike trade by squaring off the former and executing a new trade with lower strike of the same underlying stock.[click to read more]
  • Roll Forward
    An options trading strategy in which near term open option contract is squared off and new similar strike longer term expiration option position is established to replace the original trade this is typically done for a credit with short positions and a debit with long p[click to read more]
  • Roll Up
    An option strategy in which a lower strike option trade is replaced with a higher strike trade by squaring off the former and opening a new trade with higher strike price of the same underlying stock.[click to read more]
  • Russell Sage
    Well respected Financial Analyst and Politician who first introduced the OTC call and put options in 1872.[click to read more]
  • s
  • Security / Securities
    An electronic or paper certificate signifying ownership of tradable stocks, debts, futures, bonds etc. issued by corporation, government or other organization.[click to read more]
  • Sell To Close
    To square off an existing long option position by selling it.[click to read more]
  • Sell To Open
    A trade in which option is sold to buyer to initiate a trade. This is often called to 'write' the options contract as it increases the open interest in the option.[click to read more]
  • Selling Climax
    The phase of the downtrend movement of stocks or markets when the volume on the security involved suddenly rises due to panic selling.[click to read more]
  • Settlement
    The honoring of the option contract's agreement between the buyer and seller and when the underlying assets are transferred between the two parties.[click to read more]
  • Options Setup
    Setups are a specific combination of options contracts that matches a strategic objective. Setups are sometimes referred to as spreads or "strategies" (not to be confused with a Brutus Options Ranking strategy).
  • short position
    A 'position' is any open trade in a portfolio. [click to read more]
  • Short Backspread
    A type of Horizontal Ration Spread in which a credit is received by trader and the trade has unlimited profit potential on the upside.[click to read more]
  • Short Calendar Spread
    An options trading strategy in which near term open option contracts are purchased and longer term expiration option contracts are sold to take advantage of the difference in premium's time value decay. This strategy is generally less common than a debit calendar sprea[click to read more]
  • Short Covering
    The closing or squaring off action of an open short trade position.[click to read more]
  • Short Horizontal Calendar Call Spread
    A call options trading strategy in which profit is made if the market or security breaks to either upside or downside. This is achieved by buying At The Money (ATM) short term call options and simultaneously selling At The Money (ATM) Longer term call options which expi[click to read more]
  • Short (to be short)
    To sell a financial instrument in order to open a trade in expectation for a downward move in the instrument. Shorting stock requires the stock to be borrowed from the broker and then later returned. Shorting options (or writing) involves creating a new contract for t[click to read more]
  • shorting
    To sell a financial instrument in order to open a trade in expectation for a downward move in the instrument. Shorting stock requires the stock to be borrowed from the broker and then later returned. Shorting options (or writing) involves creating a new contract for t[click to read more]
  • Spread
    Setups are a specific combination of options contracts that matches a strategic objective. Setups are sometimes referred to as spreads or "strategies" (not to be confused with a Brutus Options Ranking strategy).
  • Spread Mid Price
    The contract or spread mid price is the price between the bid and ask prices currently on offer for the option contract or the spread. This is a good target for a limit price placed on an options order.
  • Spread Strategy
    The option trading strategy in which a combination of options of the same underlying security with different strikes are written and bought simultaneously.[click to read more]
  • Static Hedging
    A hedging strategy in which the risk is neutralized with only one hedging trade and does not need to be adjusted till expiry.[click to read more]
  • Stock Options
    Are the financial derivative instruments which give right but not obligation to the buyer to buy or sell a stock at a predefined price within a specific timeframe.[click to read more]
  • Stock Repair Strategy
    It's a plan to reduce the break-even point of a loosing long stock position by selling call options against it. This strategy limits the potential profits if the stock suddenly rises up sharply.[click to read more]
  • Stock Replacement Strategy
    An investment strategy in which deep in the money call options are purchased to closely replicate the payoff of underlying stock. This is done to reduce risk in the trade and the capital outlay.[click to read more]
  • Stop Limit Order
    A type of Stop Loss Order that converts to a Stop Limit Order when the security reaches a predefined price.[click to read more]
  • Stop Order
    A traditional close order with special feature of a predetermined trigger price before the order is released in the market. The trigger price of a Stop Order is a price point beyond which point he is not willing to lose more in a given trade.[click to read more]
  • Straddle
    An option trading strategy in which same quantity of puts and calls are purchased or written with same expiration date, same strike and on the same underlying security.[click to read more]
  • Strap Straddle
    An upside biased long straddle strategy in which more calls are bought than puts to take advantage of the expected upside move.[click to read more]
  • Strategy
    A predefined option trading plan devised to buy or sell option(s) and then take profit, or stop loss at a predefined price and/or time points. [click to read more]
  • Strategy Group
    A Group in your Brutus Options Ranker strategy gives you a way to organize similar criteria into a branch in your strategy tree. This keeps your strategy tree organized and allows you to assess the rank of the group by using sub-criteria.
  • Strike Arbitrage
    A risk free trading strategy in which different strike prices of same option are written and purchased so as to nullify any risk but to take advantage of different extrinsic values of these different strikes.[click to read more]
  • Strike Price
    The strike price is the agreed cost per share that the holder may either buy or sell the underlying stock when exercising the contract. The strike price remains the same until the contract expires and is critical in determining the contract's price.
  • Strip Straddle
    A type of bearish Straddle consisting of larger number of puts contracts purchased than call contracts.[click to read more]
  • Structured Warrants
    Warrants without accompanying bonds, etc. that replicates the features and payoffs of stock options . They are generally traded in Singapore Markets and less common in the U.S. Markets.[click to read more]
  • Support
    The lower trading channel line from where the security bounces back multiple times due to increase in demand for that security at support level.[click to read more]
  • Swing Trading
    A short term trading strategy in which a trader takes advantage short term price movements generally with the flow of the stock's overall trend.[click to read more]
  • Synthetic Position
    A complex combination of stocks and options trading strategy which replicates payoff of another stock or option position strategy.[click to read more]
  • Synthetic Short Straddle
    Any complex position in stocks, futures and options market that replicates the payoff of standard short straddle.[click to read more]
  • Synthetic Stock
    Any option strategy whose payoff replicates the payoff of the underlying long stock. For example a short put and a long call is a synthetic stock holding. Even though this straetgy replicates the payoff of the stock, the premium collected from the sale of the put is us[click to read more]
  • Synthetic Straddle
    A complex trading strategy in which a position similar to Long Straddle is achieved by trading combination of stocks and call option contracts.[click to read more]
  • Systematic Risk
    The risk involved in a market for panic selling across the board in the whole market at any given time. This risk can not be diversified.[click to read more]
  • Systematic Risk / Systemic Risk
    The risk of sudden collapse in the entire market inherent with any market which is not possible to diversify.[click to read more]
  • t
  • Take Delivery
    The assignment of stocks to the seller of the options when the option buyer exercises his right to sell stocks at a specific price[click to read more]
  • Technical Analysis
    The analysis of the historical prices generally through evaluation and analysis of stock and market charts for patterns and trends in order to predict the future prices.[click to read more]
  • Thales of Miletus
    The man of first historical record to create options. Thales of Miletus used options on olives to his advantage.[click to read more]
  • the buyer and the seller of this type of option.

    The buyer of the call option has the right
    A call option, often simply labeled a "call", gives the buyer the right, but not the obligation, to buy assets at a certain price before the expiry date of an option contract. [click to read more]
  • Theoretical Value
    Price of a given option as determined by an accepted pricing model.[click to read more]
  • Theta
    The greek that calculates an option premium's related to time decay. This is an extremely important parameter for premium sellers. [click to read more]
  • Ticker Symbol
    The unique symbol given to a company's shares and options to facilitate it's trading in the market. [click to read more]
  • Time Decay
    The concept of evaporation of the value of option's premium with passage of time in the life of the option.[click to read more]
  • Time Spread
    An options trading strategy in which calls or puts are purchased or sold of different expiration months but of same strike prices and same underlying asset.[click to read more]
  • Time Value
    The part of the premium of an option that decays due to the passage of time and the reduced potential for the underlying to make a large move in relation to the strike price of the option.[click to read more]
  • Topping Out
    The top formed after a rally where due to profit taking by traders causing the volume of sellers to increase beyond buyers and therefore causes prices to decline.[click to read more]
  • Total Return Concept
    A covered call selling strategy in which the sum total of incomes generated from the stock appreciation, dividends paid, call option premium profits etc are calculated together.[click to read more]
  • Trading Limit
    The upper and the lower price points beyond which a given future or option on a future can not be traded in a given trading day. Note the trading limits are only set on future products and not on stock products or equity options.[click to read more]
  • Trend
    The general direction of a security or market. A trend may be increasing or decreasing.[click to read more]
  • Triple Witching
    The expiry of stock options, index future's options and index futures. The markets see very high volumes on these dates and used to be on third Friday in the months of March, June, September, and December before 2001. After 2001, Triple Witching was replaced by Quadru[click to read more]
  • Type
    The classification of an option into class (type) of either call option or put option. [click to read more]
  • u
  • Underlying
    The underlying of an option contract is a stock, ETF, or index that the option contract trades against. The price movement and volatility of the underlying affects the pricing of the option throughout its life span.
  • Underlying Mid Price
    The underlying mid-price is the price between the bid and ask prices currently on offer for the stock or ETF. This is a good target for a limit price placed in any order that involves the underlying stock.
  • Undervalued
    When the current market price of a financial instrument is below it's fair value as determined by accepted mathematical model. Sometimes traders refer to an instrument as undervalued to express their belief that future price will appreciate.[click to read more]
  • v
  • Variable Ratio Write
    An options trading strategy in which the trader sells two call options of different strikes against 100 underlying security[click to read more]
  • Vega
    Vega is one of the Options Greeks.  It quantifies the predicted change in the option contracts value in response to a 1% increase in the underlying asset's implied volatility.
  • Vertical Ratio Spread
    An options trading strategy in which equal numbers of options are bought and sold. This strategy has unlimited profit potential in one chosen direction and the position is established with net credit received in the account.[click to read more]
  • Vertical Spread
    An options spread in which one option is bought and another is sold of the same expiry date but of different strike price. These trades can either be put on for a debit (a bet on direction/price movement) or for a credit (a bet that the underlying will not move to a sp[click to read more]
  • VIX
    An index that calculates the implied volatility levels and this measurement is used to track volatility in the American Share Market. The VIX is often referred to as the 'Fear Index'. A high VIX is usually preferred by premium sellers as they collect more money in ope[click to read more]
  • VIX Options
    The options with CBOE Volatility Index as underlying instrument. These contracts have special terms and attributes different to other option contracts.[click to read more]
  • Volatile
    A security or market that exhibits drastic up and/ or down movements.[click to read more]
  • Volatile Strategy
    An options trading strategy in which profit is made provided the stock makes large move in any direction quickly.[click to read more]
  • Volatility
    The measurement of fluctuation in underlying stock of an option. It's the historical measurement of price movement of a given stock, index or a country's whole economy over a given time period.[click to read more]
  • Volatility Crunch
    The sudden decrease in the expected move or volatility of the underlying security. The extrinsic or time value of the option reduces from high to low amounts suddenly as a result. This is most commonly seen immediately following corporate events, such as earnings annou[click to read more]
  • Volatility Index
    The index that calculates the historical fluctuations of a given security, which gives an idea of riskiness of the stock market.[click to read more]
  • Volatility Skew
    It's the difference of volatility among different strike prices of options of the same underlying security. This is created most of the time in stocks by more demand and higher premium paid for puts than for calls. This is because the majority of the market is long the[click to read more]
  • Volatility Smile
    A smile-like shape formed on a graphic representation of variance in implied volatility across different strike prices of the option that has the same expiration date and underlying security. This is a graphical representation of the volatility skew.[click to read more]
  • Volume
    The total number of trading transactions that takes place on a given trading day.[click to read more]
  • w
  • Write
    The opening of a trading position in any market by selling a financial instrument. [click to read more]
  • writing
    To sell a financial instrument in order to open a trade in expectation for a downward move in the instrument. Shorting stock requires the stock to be borrowed from the broker and then later returned. Shorting options (or writing) involves creating a new contract for t[click to read more]
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