Term
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Definition
| 2 party contract that conveys a right to the buyer and an obligation to the seller. |
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Term
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Definition
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Term
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Definition
| All calls & puts of one issueer are "classes of options" |
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Term
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Definition
| all options of 1 issuer with the same class, price & expration month are in the same series |
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Term
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Definition
| Call: Buyer has the right, but is not required, to buy an agreed quantity by a certain date for a certain price (the strike price). |
Puts: Buyer has the right, but is not required, to sell an agreed quantity by a certain date for the strike price.
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Term
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Definition
- buying calls
- writing (sell) calls
- buying puts
- writing (sell) puts
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Term
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Definition
Calls: when the market value (MV) exceeds the strike price (SP)
buyer will exercise option
Puts: when the market value (MV) is lower than strike price (SP) |
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Term
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Definition
Calls: Market price equals strike price
(buy will let option expire)
Puts: MV=SP
(sellers wants at-the-money contracts) |
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Definition
Calls: when market is lower then strike price
(buyer will not exercise)
Puts: MV is higher than SP
(sellers want, buyers do not) |
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Term
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Definition
Intrisic Value is the "in-the-money" amount
Calls: MV-SP= IV
Puts: SP-MV=IV |
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Definition
The investor doesnt make nor lose money
Calls: SP + Premium= BE
Puts: SP-Premium =BE |
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Term
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Definition
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Term
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Definition
| purchasing option before expiration to resell with a premium greater than originally paid |
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Term
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Definition
| simultaneous purchase of one option and sale of another in the same class |
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Term
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Definition
| a call and a put with the same strike price and expiration month |
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Term
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Definition
| composed of a call and a put with different strike prices, expiration months or both |
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Term
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Definition
- price or vertical: different strike prices but same experation months
- time or calendar (aka horizontal): option contract with different experation months but same strike prices.
- diagonal: options differ in both time and price
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Term
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Definition
| used by investors to reduces cost of long option position. |
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Term
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Definition
| created by investors to reduce risk of short option position |
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Term
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Definition
| created by investors to reduce risk of short put posistion |
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