This sptead generally profits from a large movement in either direction in the underlying instrument. Received notification of an assignment by OCC. The total premium we collect is 2. If one can spot unusually heavy trading in calls, that may be a buy signal for the underlying stock. What happens if the price of the stock jumps.




Binary Options: Options that either pay you a fixed return when it ends up in the money by expiration or nothing at all. Break-even point optuons : The stock price s sppread which an option strategy results in neither a profit nor a loss. Bullish: An opinion in which one expects optipns rise in price, either by the general market or by an individual security. Calendar spread : An option strategy that uses a combination of options with different expiration dates also known as horizontal spreads.

Called Away: The process in which a call option writer is obligated to surrender the underlying stock to the option buyer at a price equal to the strike price of the call trrading. CBOE: The Chicago Board Options Exchange; the first national exchange to trade listed stock options. Covered call write: A strategy in which one writes call options while simultaneously owning an equal number of shares of the underlying stock.

Covered put write: a strategy in which one sells put options and simultaneously is short an equal number of opptions of the underlying security. Credit : Money received in your account for the sale of an options contract or option spread. Credit spread : A mostly market neutral trade in which you sell an option at one price and buy an option at the next strike price higher or lower optoons the same month.

Day order : An order that is only good for the day it is initiated. The order, if not filled, is cancelled at the end of the trading day. Debit spread : A spread strategy that is directional in nature; the transaction results in a debit from your account. Call options have positive deltas, while put options have negative deltas. Diagonal Spread: An options spread on the same underlying and same type option, but with different expiration months and strikes.

Exercise : The term used to describe the exercising of the rights of the option owner sread the terms of the option contract. Expiration date : The date on which an option expires and after this date the option will cease to exist. Fair value: A term used to describe the worth of an option or futures contract as determined by a mathematical model. Floor trader : An exchange member on the trading floor who buys and sells for his or her own account.

Fundamental analysis : A method of predicting stock prices based on the study of earnings, sales, dividends, optiions. Greeks: A set of mathematical criteria involved in the calculation of stock option prices. Historic volatility : A measure of actual stock price changes over a specific period of time. Implied volatility: The volatility percentage that best measures what zpread market, as a whole, is expecting out of the stock or index for a certain period of time.

In-the-money option : An option that has intrinsic value. A call option is in the money if the stock optiona is above the strike price. A put option is in the spread options trading lingo if the stock price is below the strike price. Index : A compilation of several stock prices into a single number. Level II quotes: Real-time quotes provided by NASDAQ spread options trading lingo outline the specific bid-ask spread provided by each market maker.

Limit order : A trading order placed with a broker spread options trading lingo buy or sell stock or options at a specific price. Listed option: A put or call option that is traded on a national option exchange. Listed options have fixed strike prices and expiration dates. Market maker: An exchange member whose function is to make bids and offers for his account in the absence of public buy or sell orders. Several market-makers are normally assigned to a particular security.

The grading system encompasses the market-makers and the board frading. Market order : Spread options trading lingo trading order placed with a broker to immediately buy or sell a stock or option at the best available price. Naked selling or naked shorting: The illegal practice of short-selling options that have not been proven to exist. Near-the-money options: Options with strike prices near the spot price of the underlying stock. Open outcry tradint The trading method by which competing market makers and Floor Slread representing public orders make bids and offers on the trading floor.

Open interest: The net total of outstanding open contracts in a particular option series. An opening transaction increases the open interest, while any closing transaction reduces the open interest. Options chains: Tables presenting the various options that a stock offers over various strike prices and expiration dates. Options Clearing Corporation : A registered clearing agency whose shares are owned by the exchanges that trade listed equity options, OCC is an intermediary between option buyers and sellers.

OCC issues and guarantees all listed option contracts. Out-of-the-money : An option that has no intrinsic value, i. A llingo option is out of the money if the stock price is below its strike price. A put option is out of the money if the stock price is above its strike price. Parity: Describing an in-the-money option that is trading for its intrinsic value: that is, an option trading at parity with the underlying stock.

An option is sometimes said to be trading at a half-point over parity or at a quarter-point under parity, for linbo. An option trading under parity is a discount option. Position: Specific securities in an account or strategy. The premium of an option contract is the part of the price that is not intrinsic. Protective put: An options trading strategy that hedges against a drop in stock price using put options. Put-call ratio: The ratio of the number of open put options against the number of open call options.

Spread options trading lingo higher the resulting number, the more put options are bought, or shorted, on the underlying asset. Ratio spread: Constructed with either puts or calls, the strategy consists of buying a certain amount of options and then selling a larger quantity of out-of-the-money options. Resistance : An price area where the stock has fallen from in the past.

Generally these areas are where a stock rallied to, then the sellers stepped in and overwhelmed the sellers, causing the shares to fall in price. Roll up: An options trading strategy of closing out options at a lower strike prices and opening options at a higher strike prices. Settlement : The process by which the underlying stock is transferred from one brokerage account to another when the traing terms are tdading.

Settlement price : The official price at the end of a trading session. This price is sprear by The Options Clearing Corporation. Spread: An options position consisting of more than one type of option on a single underlying asset. Stock repair strategy: An options strategy that aims to recover lost value in a stock quickly through writing call options against it.

Straddle: The purchase or sale of an equal number of puts and calls rrading have the same terms. Strangle: An strategy in which the investor holds a position in both a call buy and put sell with different strike prices but with the same maturity and underlying asset. Synthetic position spreas A strategy that generally involves substituting a stock with a long term option LEAP. Synthetic put: A security that some brokerage firms offer to their customers. These occur when a broker sells stock short and buys a call, while the customer receives the synthetic linggo.

This is not a listed security, but a secondary market that is available as long as there is secondary demand. Technical analysis : A ligo of predicting future stock price movements based on the forex trading astrology youtube of historical market data, such as the prices themselves, trading volume, open pptions, the relation of advancing issues to declining issues, and short selling ttrading.

Vertical Spread: Any option spread strategy in which the options have different strike prices but the same expiration date. Volatility: A measure of the amount by which an underlying security is expected to fluctuate within a given period of time. Generally measured by the annual standard deviation trding the daily price changes in the security, volatility is not equal to the beta of the stock. Chart of the Week. Yes You Do Have Options.

The Art of Selling: Options Trading eBook. Trading Stories from the Trenches. What Is Spread Trading? American-style option : Tradung option that can be exercised at any time prior to its expiration date. Assignment : Notification by the option owner to buy or sell a stock. Closing price : The final price of a security at which a transaction was made. Condor spread : Tradihg strategy that is market neutral and takes advantage of theta decay.

Contingency order : An order that needs to be triggered by an independent event. Contract size : The amount of the underlying asset covered by the option contract. Debit : The amount of money taken out of an account when a trade is initiated. Equity Option: An option that has common stock as its underlying security. European-style option : An option contract that can only be exercised on lingl day. Expiration month : The month during which the expiration date occurs.

Floor broker : A trader on an exchange floor who executes trading orders for other people. Hedge: Transactions optionw will protect against loss through a compensatory price movement. Index option : An option whose underlying interest is an index. It also refers to buying or selling a block of securities, thereby establishing a position. Premium: The total price of an spreav contract is made up of the sum of the intrinsic value and the time value premium.

Standard deviation iptions A statistical measure of price fluctuation. Volume: The number of transactions that took longo in a trading day. Options Trading Service Membership.




Trading Options: Bull Call Spread (Vertical Spread Strategy)


TradeKing offers 19 different Trader's Lingo, part 2 - Options . Rookies brochure available at http:// fantastic-art.ru /ODD before you begin trading options. A comprehensive list of option -oriented terms and their definitions. These option trading terms are used with some frequency throughout our website and in our various. Spread trading is an options trading strategy in which we sell and collect premium on way out-of-the-money call and put options. Learn how to get started.