Options Lingo - Understanding Stock Options Investing Now that we understand the basic concept of option trading, it's time to mention the terminology used in the option trading world. Premium- The premium is the amount that you pay up front for the option. This amount is once-off and non-refundable. Options Trading Glossary of Terms The basic fundamentals of options trading are relatively easy to learn, but this is a very complex subject once you get into the more advanced aspects.
As such it's no surprise that there is a fair amount of terminology. · The Master List of Options Trading Terminology.
T he world of investing is chock full of esoteric terms designed for outsiders to think only experts can handle stocks. While they may seem Author: Schaeffer. · Options Trading Terms and Definitions. Dayana Yochim. Many or all of the products featured here are from our partners who compensate us. Author: Dayana Yochim. Their terms are commonly used when talking about buying stocks, but both fundamental analysis and technical analysis for trading any kind of financial instrument, including options.
In very simple terms, fundamental analysis is about carrying out research securities to establish their inherent value. · Options contract terminology. First and foremost, you will need to understand the basics of an options contract. A call option is an options contract that lets you buy stock at a set price on a. · Option traders speak their own lingo. When trading options, you can buy a call or sell a put.
You can be long or short—and neither has anything to do with your height. Consequently, you can also be in-the, at-the, or out-the-money. Those are just a few of many commonly used words you’ll hear in a room full of option bonino1933.its: · Options Trading Strategies: A Guide for Beginners.
Options are conditional derivative contracts that allow buyers of the contracts (option holders) to buy or sell a security at a chosen price. · A bond where the issuer has the option to redeem it early. Call money. Short-term finance repayable on demand.
Call option. The right to buy an agreed amount of a commodity or security for an agreed price by an agreed date. Candlestick chart. Shows trading range and opening and closing prices for a day. Capital. Money or assets put to economic use.
· 3) A call option in the equity world is an option to buy an equity at a pre-determined price, so it is an option to go long. In the fixed-income world the equivalent for swaps would be a receiver swaption, since it too is an option to go long the bonino1933.itted Reading Time: 8 mins.
An Options Trading strategy where long term call options are bought and near term call options are written in order to profit from time decay. Read the tutorial on Call Time Spread. 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. 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 example.
An option trading under parity is a discount bonino1933.itted Reading Time: 10 mins. American Option = Option which can be exercised at any time up to and including at expiration. One of option styles. Arbitrage = Trading strategy that tries to profit from mispricing of two or more related securities by buying the undervalued ones and selling the overvalued ones.
· Options Trading Definitions – Must Know Terms for Beginners — Strike Price. The strike is the exercisable price of the options contract. The call option holder makes money if upon expiry the spot price is above the agreed strike price. And similarly, put option holder makes money if the spot price is below the agreed strike bonino1933.itted Reading Time: 8 mins.
· In doing some research I have not found a standard for terms used for options trading.
I have had students discuss the meaning of some terms. It seems their opinions vary based on their background and the training they have had. So below I have put together the definitions the way I use options trading terms and acronyms. · Options Trading Terminology Call Option. A call option gives the buyer the right to buy shares at a fixed price (strike price) before a specified date (expiration date). Likewise, the seller (writer) of a call option is obligated to sell the stock at the strike price if the option is exercised.
Put OptionEstimated Reading Time: 4 mins. When you are learning the trading lingo start by knowing there are 2 types of options and they are referred to as "Calls and Puts." A Call option gives its owner the right to buy a share at a specified price within a specified period.
· Long: In the option trading, long doesn’t refer to things like distance or the amount of time you hang onto a security. It implies ownership of something. After you have purchased an option or a stock, you are considered “long” that position in your bonino1933.its: 4. An option is trading at a discount if it is selling for less than its intrinsic value. Example XYZ is 55, the Jan 50 call is 4½ this is a ½ point discount, since the intrinsic value is 55 − 50 = 5.
Early exercise or assignment The exercise or assignment of an option before its expiration date.
A change to contract terms due to a corporate action (e.g., a merger or stock split). Depending on the corporate action, different contract terms (including strike price, deliverable, expiration date, multiplier etc.) could be adjusted. An adjusted option may cover more or less than the usual shares.
For example, after a 3-for-2 stock split. If three trading days pass, the option's value would theoretically decrease by $ which resembles the Greek letter nu, found its way into stock-trading lingo. Rho. Day Trading Terminology Every Trader MUST Understand.
Day trading terminology is something every trader will need to understand. We’re going to start with basic terms that most day traders will already be familiar with.
Then we’ll jump into the more advanced terms Estimated Reading Time: 10 mins. · Option trading terms So if a put has option trading terms a strike price of $50 and the stock is trading at $45, that option is in-the-money.
- An option is at-the-money if the price of the stock is exactly equal to the strike price of the option. In other words, if you have an AAPL $ call and AAPL is at $, then your option is at-the-money. At the money refers to both call options and put options. In layman’s terms, it means the option owner buys or sells the underlying stock at the strike price, and requires the option seller to take the other side of the trade.
Interestingly, options are a lot like most people, in that exercise is a fairly infrequent event. (See Cashing Out Your Options.).
Options Trading Terminology & Definitions. Puts & Calls for DummiesIn this video, you're going to learn about puts and calls in options trading with this opt.
Stock Trading Acronyms. HOD - High of Day (nHOD = new high of day) LOD - Low of Day (nLOD = new low of day) Typically NOT used near market open. Proper usage is when a stock has retreated from a high or low, then later makes a new high or new low. Green to Red (G/R) – Stock was above prior day’s close, but now has dropped below it. Note that the binary trading lingo found on this page covers all of the major binary options platforms.
Asset – The instrument that underlies the trade. Binary options are traded based on stocks, commodities, currency pairs, and indices. · Opportunistic Trading Log. Here is a running list of the trades Lingo has made. I will post detail analysis each week on the week’s trades. 2/11/ made a purchase of BA puts expiring 3/22/ with a strike of $ and the stock was trading at $ The cost of the option was $ a share.
Closed out the position on 3/11/ for. Basic Option Terms. Trading stock options requires you to add a few new terms to your personal investing lexicon. Below are a few of the basic option terms that might be unfamiliar to rookies.