American Stock Exchange (AMEX):
The American Stock Exchange is a US securities exchange handling about 15% of all US trades.
Showing posts with label Stock Option Terms. Show all posts
Showing posts with label Stock Option Terms. Show all posts
Wednesday, November 26, 2008
Stock Option Terms: American Style Options
American Style Options:
American style options are options that can be exercised at any time up to the option expiration date. Most stock options are American style options.
American style options are options that can be exercised at any time up to the option expiration date. Most stock options are American style options.
Stock Option Terms: Arbitrage (Option)
Option Arbitrage:
Option arbitrage occurs where the simultaneous purchase and sale of options and / or the underlying stock results in a guaranteed profit on the trade. For example, conversion arbitrage.
Option arbitrage occurs where the simultaneous purchase and sale of options and / or the underlying stock results in a guaranteed profit on the trade. For example, conversion arbitrage.
Stock Option Terms: Ask
Ask:
An ask price is the price at which you buy an option and the price at which option market makers and floor brokers are willing to sell an option.
An ask price is the price at which you buy an option and the price at which option market makers and floor brokers are willing to sell an option.
Stock Option Terms: At the Money (ATM)
At the Money Option (ATM):
An at the money option (ATM) is an option where the exercise price is the same as the market price of the underlying asset.
An at the money option (ATM) is an option where the exercise price is the same as the market price of the underlying asset.
Stock Option Terms: At the Opening Order
At the Opening Order:
An at the opening order is an order specifying execution at the market opening or the option order is cancelled.
An at the opening order is an order specifying execution at the market opening or the option order is cancelled.
Stock Option Terms: Automatic Exercise
Automatic Exercise:
Automatic exercise of options occur when an option expires in the money (ITM) at expiration.
Automatic exercise of options occur when an option expires in the money (ITM) at expiration.
Stock Option Terms: Backspread
Backspread:
A backspread is a spread where more options (either calls or puts) are bought than sold. The backspread is the opposite of a ratio spread.
A backspread is a spread where more options (either calls or puts) are bought than sold. The backspread is the opposite of a ratio spread.
Stock Option Terms: Bear Call Spread
Bear Call Spread:
A bear call spread is a net credit option spread using calls only where the option trader buys a higher strike call and sells a lower priced call option. The higher strike call is cheaper than the lower strike call and thus the bear call spread results in a net credit to the option trader.
A bear call spread is a net credit option spread using calls only where the option trader buys a higher strike call and sells a lower priced call option. The higher strike call is cheaper than the lower strike call and thus the bear call spread results in a net credit to the option trader.
Stock Option Terms: Bear Put Spread
Bear Put Spread:
A bear put spread is a net debit spread using only puts where the trader buys a higher strike put and sells a lower strike put. The higher strike put is more expensive resulting in a net debit on the bear put spread trade.
A bear put spread is a net debit spread using only puts where the trader buys a higher strike put and sells a lower strike put. The higher strike put is more expensive resulting in a net debit on the bear put spread trade.
Stock Option Terms: Bid
Bid:
The bid price is the price a options trader sells at and the price that option market makers will buy an option for.
The bid price is the price a options trader sells at and the price that option market makers will buy an option for.
Stock Option Terms: Bid-Ask Spread
Bid-Ask Spread:
The bid ask spread in options is the difference between the bid and ask prices. You buy at the ask price and sell at the bid price.
The bid ask spread in options is the difference between the bid and ask prices. You buy at the ask price and sell at the bid price.
Stock Option Terms: Blow Off Top
Blow Off Top:
A blow off top is a large price gain followed by a quick price drop. Often a blow off top is accompanied by high volume and is seen as a technical indicator for the end of a bullish trend.
A blow off top is a large price gain followed by a quick price drop. Often a blow off top is accompanied by high volume and is seen as a technical indicator for the end of a bullish trend.
Stock Option Terms: Breakout
Breakout:
A breakout is where a price chart emerges upward beyond the previous price resistance level.
A breakout is where a price chart emerges upward beyond the previous price resistance level.
Stock Option Terms: Bull Call Spread
Bull Call Spread:
A bull call spread is a net debit spread using calls only in which the option trader buys a lower strike call and sells a higher strike call option. Because the lower strike call is more costly than the higher price call option sold, the trader ends up with a net debit on a bull call spread.
A bull call spread is a net debit spread using calls only in which the option trader buys a lower strike call and sells a higher strike call option. Because the lower strike call is more costly than the higher price call option sold, the trader ends up with a net debit on a bull call spread.
Stock Option Terms: Bull Put Spread
Bull Put Spread:
A bull put spread is a net credit spread using puts only in which the trader buys a lower strike put and sells a higher strike put. The lower strike put is less costly than the higher strike put that is sold resulting in a net credit.
A bull put spread is a net credit spread using puts only in which the trader buys a lower strike put and sells a higher strike put. The lower strike put is less costly than the higher strike put that is sold resulting in a net credit.
Stock Option Terms: Butterfly Spread
Butterfly Spread:
A butterfly spread is a 3-leg option trading strategy using all calls or all puts.
Calls:
1. Buy a lower strike in the money call
2. Sell 2 middle stirke at the money calls
3. Buy a higher strike out of the money call
Puts:
1. Buy 1 lower strike out of the money put
2. Sell two middle strike at the money puts
3. Buy 1 higher strike in the money put.
The butterfly spread will be a net debit transaction and has two breakeven scenarios; one to the upside and one to the downside.
A butterfly spread is a 3-leg option trading strategy using all calls or all puts.
Calls:
1. Buy a lower strike in the money call
2. Sell 2 middle stirke at the money calls
3. Buy a higher strike out of the money call
Puts:
1. Buy 1 lower strike out of the money put
2. Sell two middle strike at the money puts
3. Buy 1 higher strike in the money put.
The butterfly spread will be a net debit transaction and has two breakeven scenarios; one to the upside and one to the downside.
Stock Option Terms: Calendar Spread
Calendar Spread:
A calendar spread is a 2 leg option strategy where the trader sells shorter term options and buys longer term options. A calendar spread uses all calls or all puts, depending on the traders outlook.
A calendar spread is a 2 leg option strategy where the trader sells shorter term options and buys longer term options. A calendar spread uses all calls or all puts, depending on the traders outlook.
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