Counter strike 16 best options brokers
Really thanks for your valuable guidance. U r taking so much efforts to make us learning and encouraging us for trading. CE purchased on 3rd Oct. Now I have a question that I purchased a call Rs. Now the premium price for same lot , and price on 4 th of Oct expiring on 26 th Oct. In this Decreased or increased situation can i sell my option CE on Rs. If profit made, profit and premium paid will be credited to my account on 4 th Oct or on 26 the Oct..
Yes, you can sell the option at 11 and make a profit of 8, no need to wait till expiry. Yes, you will get the profit credited to your trading account on 4th.
Recently I am going thru your Technical Analysis Module which gives pleasure in reading and understanding. Your modules are as good as you are teaching in class, that much effective information is provided and hence a Lay Man like me can get understand the tricks of trading. It is now 8 days and sent 3 email reminders. Can you please ask why they are showing so unprofessional behavior. No one contacted me till now: Sorry to say but very unprofessional behavior.
I noticed one more issue in Kite. Please tell me where I am wrong. Since these are intraday trade, you lost 13 points in the first trade and now on the 2nd trade, you; ve made 11 points. So net-net you are losing 2 points. You replied below query but not mine. I am still learning after studying all the theoretical now I am doing practical.
And I am noticing bugs in profit calculation therefore asking you to clarify my doubt. Now I am stuck what should I do? We answer ALL queries that come in here. Really very nicely explained chapters, I am still going through the chapters. I had just a simple query regarding Bank Nifty. Bank Nifty as the name suggests is group of banks that decide Bank Nifty Index.
Will you please indicate different parameters , stocks etc. Everything about Nifty Bank is here — http: For this reason, its available only in English. The article is super and your patience in answering each comment here is commendable too. This is the first article I read on your site and am interested enough to start at Module 1, chapter 1!
Thank you, Karthik, for your efforts in creating and maintaining this varsity. If Ajay pays Rs. Hey In the case that the land price remains 5L, Ajay should be neutral and not opposed to buying the land. In fact, the amount paid as premium should not factor into his decision on whether to buy or sell the land. Can a stop loss be placed for options? If yes does it remain valid intra day and we have to manually place it again next day or does it remain valid once placed till it is triggered?
Commodities go on till Then is there are any chances that my premium value comes to zero? In fact, you can square off anytime before the expiry. Thank you sir for reply. Suppose 1 day before expiry it is trading at 50 CE. Suppose 1 day before expiry it is trading at 5CE. Suppose in swing trade , I am in loss in this contract and did not close my position on expiry ON 3.
Capital gains will be taxed based on your income bracket. Suggest you read this module on taxation — https: And also if market trends up again till Jan my prize also goes up? Or am I obligated to hold that position till expiry? Both buyers and sellers of options have the flexibility to square off their positions anytime they wish, no need to wait for expiry.
And as per expectations price and premium goes up therefore i wanted to book profit. I was entering exit order at market price but everytime order was getting rejected. When we buy option we have right to exercise it any time then why my order was rejected? After entering exit order for minimum times my sell order gets executed n i earned profit.
So, please tell me whether i was doing any wrong process or there is something about call square off before expiry which i dont know.. Sir, I was not getting any error. At end instead of selling at market price i clicked on limit price that time my order gets executed. Ah, I get it. We do not allow market order for stock option, it has to be a limit order. This is because of the lack of liquidity and the associated volatility.
Also, whenever an order is rejected, there will be a rejection reason which is displayed. That will give you the information. Is it easy to sell this huge qty on expiry day? As you have mentioned in the module Call Options , the loss is limited to the premium that we paid. Infact it went down. Since the price went down, I did not sell the stock as i do not want to take more loss.
The loss when you buy an option call or put is restricted to the extent of the premium paid. Hence, your loss here would be Theoretically, when PE increases, CE should decrease and vice-versa.
Options premiums have multiple forces acting on them simultaneously. The direction of the market is just one of them. But the answer to your query is because of Volatility.
Increase in volatility increases option premiums and vice versa. I need to execute the below orders 1. Buy 1 lot of Bank Nifty options i. Sell 1 lot of Bank Nifty options i. The maximum loss I can incur is around and the maximum profit is around , then why do I need 59K? Is it a requirement from Exchanges? I bought Reliance Call at Rs. If I buy option for intraday MIS as order. Can we expect monthly unlimited plans for options traders or derivative segments?
Because of this plan so many peoples are preferring to open account in ProStocks especially day traders. Hope you will come with some plans for day traders too like investors, there is no doubt about your services one of the best broker in India thank you so much for this. Sunil, multiple plans only confuse clients. Now can i square-off my position at this stage or do i have to wait mandatory till the contract expire. No extra charges for this. If you leave the option to expiry, that is considered as expressing your interest to exercise the option.
Please clear my doubt regarding options trading. I purchase 1 lot of the same. Can I book profit by selling that 1 lot even though the stock has not hit the strike price? Two days later, it went all way up to Rs. Finally, it expired worthless resulting in a loss. If I buy any stock in option,and I want to sell in stock in profit,so I can wait for my expiry date or before I can book profit.
There are only 3 possible scenarios, out which 2 indeed benefit Venu. Statistically, Venu has You have considered all possible outcomes equally probable. I get your point, Rayan. Perhaps I should have worded it better. What I really meant to say was — out of the 3 possible outcomes, 2 favor Venu. This gives Venu an edge, but like you mentioned, all the three scenarios have an equal probability of occurrence.
I guess you did not understand my question.. I just have a query. Is it necessary for the option contract to cross the strike price to be in profit. Or we can book profit by squaring off on the same day or days after if the premium is increased, but still the strike price is not reached. Eg — Purchased Put option of Nifty with a strike price of 67 squared off at premium , but the strike price of is not reached yet. And how to calculate profit after the contract crosses the strike price??
Your profit will be the difference between the buy and sell price of the strike…i. All my doubts are cleared now regarding the calculation of profit.
I am feeling more confident now. Regarding the new rule of product suitability to curb retail participation in fno products will this be extended even to intraday stock trading with leverage BO and CO orders or is it limited to only futures and options? Here is a quick recap of the history of the Indian derivative markets — June 12th — Index futures were launched June 4th —Index options were launched July 2nd — Stock options were launched November 9th — Single stock futures were launched.
Ajay wants to play it safe, he thinks through the whole situation and finally proposes a special structured arrangement to Venu, which Ajay believes is a win-win for both of them, the details of the arrangement is as follows — Ajay pays an upfront fee of Rs. Consider this as a non refundable agreement fees that Ajay pays Against this fees, Venu agrees to sell the land after 6 months to Ajay The price of the sale which is expected 6 months later is fixed today at Rs.
Do note, he is fixing a price and paying an additional Rs. However irrespective of what happens to the highway, there are only three possible outcomes — Once the highway project comes up, the price of the land would go up, say it shoots up to Rs.
Scenario 1 — Price goes up to Rs. So how much money is Ajay making? Scenario 2 — Price goes down to Rs. Here is the math that explains why it does not make sense to buy the land — Remember the sale price is fixed at Rs. Scenario 3 — Price stays at Rs. Agreed Ajay would lose 1 lakh, but the best part is that Ajay knows his maximum loss which is 1 lakh before hand. Hence there are no negative surprises for him. Also, as and when the land prices increases, so would his profits and therefore his returns.
He would lose a lot of money if the land prices increases after 6 months right? Well, think about it. The agreement is entered after the exchange of 1 lakh, hence 1 lakh is the price of this option agreement.
As a thumb rule, in an options agreement the buyer always has a right and the seller has an obligation I would suggest you be absolutely thorough with this example. Let us now proceed to understand the same example from the stock market perspective. And they are- The stock price can go up, say Rs. Now that we are through with the various concepts, let us understand options and their associated terms Variable Ajay — Venu Transaction Stock Example Remark Underlying 1 acre land Stock Do note the concept of lot size is applicable in options.
So just like in the land deal where the deal was on 1 acre land, not more or not less, the option contract will be the lot size Expiry 6 months 1 month Like in futures there are 3 expiries available Reference Price Rs. We will understand the logic soon Regulator None, based on good faith Stock Exchange All options are cash settled, no defaults have occurred until now. March 18, at March 19, at 5: August 5, at 3: August 6, at August 7, at 8: August 7, at October 25, at 9: November 17, at March 29, at 1: March 31, at 8: March 18, at 1: March 19, at 4: December 25, at 8: December 27, at 3: December 5, at 1: December 6, at March 18, at 3: April 5, at 4: April 6, at 6: May 17, at 6: May 18, at May 18, at 6: May 19, at 1: March 30, at 5: March 31, at 5: May 18, at 4: May 19, at March 18, at 4: March 19, at 6: March 20, at 4: March 20, at 7: March 21, at 7: March 20, at 3: March 22, at 8: March 21, at 1: March 22, at 5: March 23, at 4: March 22, at 6: March 23, at 1: March 24, at 6: April 18, at 7: April 19, at 3: March 24, at 8: March 25, at 4: April 18, at 3: March 24, at 1: March 30, at 2: March 31, at 4: April 13, at 1: April 14, at 4: April 28, at 8: April 29, at 5: June 2, at 8: June 3, at 5: June 10, at June 12, at 7: S Senthil Kumar says: June 29, at July 1, at 6: June 30, at 7: July 4, at July 4, at 5: July 5, at 4: July 6, at 4: July 10, at 7: July 12, at 3: July 13, at 3: July 13, at 7: July 20, at 1: July 21, at 6: July 31, at August 2, at 5: July 31, at 1: August 12, at August 13, at 5: August 30, at 5: August 30, at 2: September 2, at 3: September 3, at 7: September 5, at September 6, at 8: September 16, at 7: September 17, at 6: September 20, at 7: September 21, at 4: September 20, at 4: September 21, at 5: September 21, at 6: November 18, at March 4, at March 5, at October 11, at 1: October 13, at October 21, at October 21, at 1: October 27, at 2: October 29, at 8: October 26, at 9: October 27, at 4: October 28, at October 30, at October 31, at 1: November 23, at 9: November 23, at November 27, at 6: November 27, at 4: November 28, at 4: December 17, at 4: December 18, at 5: December 22, at 4: December 23, at 7: December 23, at 6: December 24, at December 29, at 5: December 29, at 6: December 30, at 7: December 31, at 8: December 31, at January 1, at 5: January 1, at January 2, at 3: January 8, at 4: January 9, at 8: January 20, at January 21, at 5: March 4, at 7: January 21, at 6: January 22, at 5: February 9, at 6: February 10, at 3: February 10, at 6: February 19, at 2: February 21, at 2: March 20, at 6: March 23, at 6: March 21, at 3: April 19, at 7: July 3, at 7: July 6, at 6: July 7, at July 23, at Rama krishan reddy says: July 24, at 4: July 25, at July 26, at July 29, at 2: July 29, at 6: August 25, at 9: August 26, at September 6, at 9: September 6, at September 13, at 5: September 14, at September 30, at September 30, at 1: November 15, at 9: November 24, at November 25, at 2: November 25, at 4: December 2, at 8: December 3, at December 4, at 9: December 12, at 3: December 13, at December 2, at 5: December 20, at December 21, at February 13, at 4: February 14, at February 15, at February 15, at 4: February 15, at 1: February 15, at 9: February 16, at 7: March 4, at 2: March 4, at 4: March 5, at 8: March 11, at 3: March 12, at 9: March 22, at March 22, at 1: April 10, at April 11, at 7: April 11, at 4: April 12, at 7: April 18, at 9: April 19, at May 21, at May 21, at 6: May 24, at 4: May 25, at 8: May 25, at 2: May 26, at 5: May 28, at May 28, at 5: May 28, at 9: May 29, at 6: May 29, at 3: May 29, at 7: Chaithanya Kumar D says: June 2, at 7: June 4, at 6: August 13, at August 14, at 8: August 14, at 7: August 15, at 8: August 21, at 1: August 22, at August 24, at August 25, at 8: August 27, at 6: August 28, at September 19, at Ravi Kumar BA says: September 19, at 6: September 20, at September 26, at September 27, at October 16, at 7: October 17, at October 16, at 8: October 16, at October 17, at 4: October 18, at October 22, at 5: October 23, at October 24, at October 25, at October 26, at October 27, at 9: October 27, at 7: October 27, at 1: November 2, at November 3, at November 6, at 9: November 7, at November 8, at 8: November 9, at December 9, at December 10, at 8: March 12, at 2: November 11, at 2: November 11, at November 13, at 4: November 14, at 8: November 14, at 1: November 15, at November 20, at 5: November 21, at November 20, at 7: November 20, at November 21, at 1: November 22, at November 29, at 1: November 29, at November 29, at 5: November 30, at December 1, at 4: December 2, at December 2, at 1: December 4, at December 5, at December 5, at 8: December 8, at 1: December 9, at 8: December 9, at 4: December 11, at 6: December 12, at 6: December 18, at 2: December 19, at December 27, at 4: December 30, at 4: December 31, at 7: January 11, at 4: January 12, at January 12, at 1: January 13, at 9: January 15, at 8: January 15, at January 16, at 5: January 17, at 9: January 18, at 4: January 19, at Sunil Kumar V R says: January 19, at 9: January 20, at 9: January 21, at 4: January 21, at January 21, at 2: January 22, at January 23, at 7: February 11, at 7: February 12, at Assignment - Notification by OCC to a clearing member that an owner of an option has exercised their rights.
For equity and index options, OCC makes assignments on a random basis. See also Delivery and Exercise. Averaging down - Buying more of a stock or an option at a lower price than the original purchase to reduce the average cost.
Backspread - A Delta-neutral spread composed of more long options than short options on the same underlying instrument. This position generally profits from a large movement in either direction in the underlying instrument. Bats - Bats Options Exchange Bear or bearish spread - One of a variety of strategies involving two or more options or options combined with a position in the underlying stock that can potentially profit from a fall in the price of the underlying stock.
Bear spread call - The simultaneous writing of one call option with a lower strike price and the purchase of another call option with a higher strike price. Bear spread put - The simultaneous purchase of one put option with a higher strike price and the writing of another put option with a lower strike price.
Bearish - An adjective describing the opinion that a stock, or a market in general, will decline in price; a negative or pessimistic outlook. Beta - A measure of how closely the movement of an individual stock tracks the movement of the entire stock market. Black-Scholes formula - The first widely used model for option pricing.
This formula is used to calculate a theoretical value for an option using current stock prices, expected dividends, the option's strike price, expected interest rates, time to expiration and expected stock volatility.
While the Black-Scholes model does not perfectly describe real-world options markets, it is often used in the valuation and trading of options. BOX - BOX Options Exchange Box spread - A four-sided option spread that involves a long call and a short put at one strike price in addition to a short call and a long put at another strike price. Break-even point s - The stock price s at which an option strategy results in neither a profit nor a loss.
While a strategy's break-even point s are normally stated as of the option's expiration date, a theoretical option pricing model can be used to determine the strategy's break-even point s for other dates as well.
Broker - A person acting as an agent for making securities transactions. An account executive or a broker at a brokerage firm who deals directly with customers. A floor broker on the trading floor of an exchange actually executes someone else's trading orders. Bull or bullish spread - One of a variety of strategies involving two or more options or options combined with an underlying stock position that may potentially profit from a rise in the price of the underlying stock. Bull spread call - The simultaneous purchase of one call option with a lower strike price and the writing of another call option with a higher strike price.
Bull spread put - The simultaneous writing of one put option with a higher strike price and the purchase of another put option with a lower strike price.
Bullish - An adjective describing the opinion that a stock, or the market in general, will rise in price; a positive or optimistic outlook. Butterfly spread - A strategy involving three strike prices with both limited risk and limited profit potential. Establish a long call butterfly by buying one call at the lowest strike price, writing two calls at the middle strike price and buying one call at the highest strike price.
Establish a long put butterfly by buying one put at the highest strike price, writing two puts at the middle strike price and buying one put at the lowest strike price.
Buy-write - A covered call position that includes a stock purchase and an equivalent number of calls written at the same time. This position may be a combined order with both sides buying stock and writing calls executed simultaneously. C2 - C2 Options Exchange Calendar spread - An option strategy that generally involves the purchase of a longer-termed option s call or put and the writing of an equal number of nearer-termed option s of the same type and strike price.
See also Horizontal spread. Call option - An option contract that gives the owner the right but not the obligation to buy the underlying security at a specified price its strike price for a certain, fixed period until its expiration. For the writer of a call option, the contract represents an obligation to sell the underlying product if the option is assigned.
Cash settlement amount - The difference between the exercise price of the option being exercised and the exercise settlement value of the index on the day the index option is exercised. See also Exercise settlement amount. A selling transaction closes an existing long option position. A purchase transaction closes an existing short option position. This transaction reduces the open interest for the specific option involved.
Closing price - The final price of a security at which a transaction was made. See also Settlement price. Collar - A protective strategy in which a written call and a long put are taken against a previously owned long stock position.
The options typically have different strike prices put strike lower than call strike. Expiration months may or may not be the same. The investor may also use the reverse a long call combined with a written put if he has previously established a short stock position in XYZ Corporation. Collateral - Securities against which loans are made. If the value of the securities relative to the loan declines to an unacceptable level, this triggers a margin call.
As such, the investor is asked to post additional collateral or the securities are sold to repay the loan. Combination - An arrangement of options involving two long, two short, or one long and one short positions. The positions can have different strikes or expiration months. The term combination varies by investor. Condor spread - A strategy involving four strike prices with both limited risk and limited profit potential. Establish a long call condor spread by buying one call at the lowest strike, writing one call at the second strike, writing another call at the third strike, and buying one call at the fourth highest strike.
This spread is also referred to as a flat-top butterfly. Contingency order - An order to execute a transaction in one security that depends on the price of another security. Contract size - The amount of the underlying asset covered by the option contract. This is shares for 1 equity option unless adjusted for a special event. Conversion - An investment strategy in which a long put and a short call with the same strike price and expiration combine with long stock to lock in a nearly riskless profit.
The process of executing these three-sided trades is sometimes called conversion arbitrage. Cover - To close out an open position. This term most often describes the purchase of an option or stock to close out an existing short position for either a profit or loss. See also Buy-write and Overwrite. Covered combination - A strategy in which one call and one put with the same expiration, but different strike prices, are written against each shares of the underlying stock.
In actuality, this is not a fully covered strategy because assignment on the short put requires purchase of additional stock. Covered option - An open short option position completely offset by a corresponding stock or option position. A covered call could be offset by long stock or a long call, while a covered put could be offset by a long put or a short stock position. This insures that if the owner of the option exercises, the writer of the option will not have a problem fulfilling the delivery requirements.
See also Uncovered call option writing and Uncovered put option writing. Covered straddle - An option strategy in which one call and one put with the same strike price and expiration are written against each shares of the underlying stock. Credit - Money received in an account either from a deposit or from a transaction that results in increasing the account's cash balance. Credit spread - A spread strategy that increases the account's cash balance when established.
A bull spread with puts and a bear spread with calls are examples of credit spreads. Curvature - A measure of the rate of change in an option's Delta for a one-unit change in the price of the underlying stock.
Cycle - The expiration dates applicable to the different series of options. Traditionally, there were three cycles: For example, on January 1, a stock in the January cycle will be trading options expiring in these months: January, February, April and July.
Day order - A type of option order that instructs the broker to cancel any unfilled portion of the order at the close of trading on the day the order was first entered. Day trade - A position stock or option that is opened and closed on the same day.
Day Trade Buying Power Debit - Money paid out from an account from either a withdrawal or a transaction that results in decreasing the cash balance. Debit spread - A spread strategy that decreases the account's cash balance when established. A bull spread with calls and a bear spread with puts are examples of debit spreads. Decay - A term used to describe how the theoretical value of an option erodes or declines with the passage of time.
Time decay is specifically quantified by Theta. Delivery - The process of meeting the terms of a written option contract when notification of assignment has been received. In the case of a short equity call, the writer must deliver stock and in return receives cash for the stock sold.
In the case of a short equity put, the writer pays cash and in return receives the stock. Delta - A measure of the rate of change in an option's theoretical value for a one-unit change in the price of the underlying stock.
Diagonal spread - A strategy involving the simultaneous purchase and writing of two options of the same type that have different strike prices and different expiration dates.
Discount - An adjective used to describe an option that is trading at a price less than its intrinsic value i. Discretion - Freedom given by an investor to his or her account executive to use judgment regarding the execution of an order. Discretion can be limited, as in the case of a limit order that gives the floor broker price flexibility beyond the stated limit price to use his or her judgment in executing the order. Discretion can also be unlimited, as in the case of a market-not-held order.
Early exercise - A feature of American-style options that allows the owner to exercise an option at any time prior to expiration. The investor keeps this amount after all positions are closed and all margin loans paid off. Equity option - An option on shares of an individual common stock or exchange traded fund. Equivalent strategy - A strategy that has the same risk-reward profile as another strategy. For example, a long May call vertical spread is equivalent to a short May put vertical spread.
See also Synthetic position. European-style option - An option that can be exercised only during a specified period just prior to expiration. See also American-style option. On the ex-dividend date, the previous day's closing price is reduced by the amount of the dividend because purchasers of the stock on the ex-dividend date will not receive the dividend payment. This date is sometimes referred to simply as the ex-date, and can apply to other situations e. If you purchase a stock on the ex-date for a split or distribution, you are not entitled to the split stock or that distribution.
However, the opening price for the stock will have been reduced by an appropriate amount, as on the ex-dividend date. Weekly financial publications, such as Barron's, often include a stock's upcoming ex-date as part of their stock tables.
Exchange traded funds ETFs - Exchange traded funds ETFs are index funds or trusts listed on an exchange and traded in a similar fashion as a single equity. Today, the number of ETFs that trade options continues to grow and diversify. Investors can buy or sell shares in the collective performance of an entire stock portfolio or a bond portfolio as a single security. Exchange traded funds allow investors to enjoy some of the more favorable features of stock trading, such as liquidity and ease of equity style, in an environment of more traditional index investing.
Exercise - To invoke the rights granted to the owner of an option contract. In the case of a call, the option owner buys the underlying stock. In the case of a put, the option owner sells the underlying stock. Exercise by exception processing - A procedure used by OCC as an operational convenience for clearing members. Under these proceedings, OCC assumes a clearing member tendered exercise notices for options that are in-the-money by threshold amounts, unless specifically instructed not to do so.
This procedure protects the owner from losing the intrinsic value of the option because of failure to exercise. Unless instructed not to do so, all expiring equity options held in customer accounts are exercised if they are in-the-money by a specified amount. Exercise price - The price that the owner of an option can purchase call or sell put the underlying stock. Used interchangeably with strike or strike price. Exercise settlement amount - The difference between the exercise price of the option being exercised and the exercise settlement value of the index on the day the index option is exercised.
Expiration cycle - The expiration dates applicable to the different series of options. Expiration date - The date that an option and the right to exercise it cease to exist.
Expiration Friday - The last business day prior to the option's expiration date during which purchases and sales of options can be made. For equity options, this is generally the third Friday of the expiration month. If the third Friday of the month is an exchange holiday, the last trading day is the Thursday immediately preceding the third Friday.
Expiration month - The month that the expiration date occurs. Fence - A protective strategy in which a written call and a long put are added to a previously owned long stock position, also referred to as a collar. The options may have the same strike price or different strike prices. The expiration months may or may not be the same. An investor might also use the reverse a long call combined with a written put if he has previously established a short stock position in XYZ Corporation.
Fill-or-kill order FOK - A type of option order that requires that the order be executed completely or not at all. A fill-or-kill order is similar to an all-or-none AON order. The difference is that if the order cannot be completely executed i. Floor trader - An exchange member on the trading floor who buys and sells for their own account.
Fundamental analysis - A method of predicting stock prices based on the study of earnings, sales, dividends, and so on. Fungibility - Interchangeability resulting from standardization. Options listed on national exchanges are fungible, while over-the-counter options generally are not. Gamma - A measure of the rate of change in an option's Delta for a one-unit change in the price of the underlying stock. This is unlike a day order, which expires if not executed by the end of the trading day.
If not executed, a GTC option order is automatically cancelled at the option's expiration. For example, an owner of common stock may buy a put option to hedge against a possible stock price decline. Historic volatility - A measure of actual stock price changes over a specific period. See also Standard deviation. Holder - Any person who has made an opening purchase transaction, call or put, and has that position in a brokerage account. Horizontal spread - An option strategy that generally involves the purchase of a farther-term option call or put and the writing of an equal number of nearer-term options of the same type and strike price.
See also Calendar spread. Immediate-or-cancel order IOC - A type of option order that gives the trading crowd one opportunity to take the other side of the trade. After announcement, the order is either partially or totally filled with any remaining balance immediately cancelled.
Implied volatility - The volatility percentage that produces the best fit for all underlying option prices on that underlying stock. See also Individual volatility. For standard options, a call option is in-the-money if the stock price is above the strike price. A put option is in-the-money if the stock price is below the strike price. Index - A compilation of several stock prices into a single number. Index option - An option whose underlying interest is an index.
Generally, index options are cash-settled. Individual volatility - The volatility percentage that justifies an option's price, as opposed to historic volatility or implied volatility. A theoretical pricing model can be used to generate an option's individual volatility when the five remaining quantifiable factors stock price, time until expiration, strike price, interest rates and cash dividends are entered along with the price of the option itself.
Institution - A professional investment management company. Typically, this term describes money managers such as banks, pension funds, mutual funds and insurance companies. Intrinsic value - The in-the-money portion of an option's premium.
Iron butterfly - An option strategy with limited risk and limited profit potential that involves both a long or short straddle , and a short or long strangle. An iron butterfly contains four options. It is equivalent to a regular butterfly spread that contains only three options. Kappa - A measure of the rate of change in an option's theoretical value for a one-unit change in the volatility assumption. Lambda - A measure of leverage.
Last trading day - The last business day before the option's expiration date during which purchases and sales of options can be made. Leg - A term describing one side of a position with two or more sides.
When a trader legs into a spread, they establish one side first, hoping for a favorable price movement in order to execute the other side at a better price. This is a higher-risk method of establishing a spread position.
Leverage - A term describing the greater percentage of profit or loss potential when a given amount of money controls a security with a much larger face value. For example, a call option enables the owner to assume the upside potential of shares of stock by investing a much smaller amount than that required to buy the stock.
Limit order - A trading order placed with a broker to buy or sell stock or options at a specific price. Listed option - A put or call traded on a national options exchange.
In contrast, over-the-counter options usually have non-standard or negotiated terms. Long option position - The position of an option purchaser owner which represents the right to either buy stock in the case of a call or to sell stock in the case of a put at a specified price strike price at or before some date in the future the expiration date.
This position results from an opening purchase transaction long call or long put. Long stock position - A position in which an investor has purchased and owns stock. To buy on margin refers to borrowing part of the purchase price of a security from a brokerage firm.