Options trading terminology. Options Trading Terminology


Read Review Visit Broker A Albatross Spread: This is an advanced strategy that can be used to profit from an underlying security remaining neutral. Learn how to use an Albatross Spread. American Style Option: A contract that gives the holder the flexibility of choosing to exercise their option at any point between buying the contract and the contract expiring. More on American Style.

Options Trading Terminology

Approval Levels: See Options trading terminology Levels. Arbitrage: Taking advantage of price discrepancies by buying and selling to create a risk free trade.

  1. But here we present the standard textbook definitions for a whole slew of options terminology without any jokes, interjections or unnecessary asides.
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Arbitrage Trading Strategies: Strategies that involve the use of arbitrage. Read more at Arbitrage Strategies. Ask Price: The price it costs to buy options trading terminology option. Assignment: When the writer of a contract is required to fulfill their obligations under the terms of that contract — for example buying the options trading terminology security if they have written calls or selling the underlying security if they have written puts.

The writer will be issued with an assignment notice in such circumstances. At the Money Option: An option where the price of the underlying security is the same as the strike price.

Automatic Exercise: The process by which in the money options are automatically exercised if they are in the money at the point of expiration. Auto Trading: A trading method that involves using a third party to select your trades and having your broker automatically execute them.

options trading terminology

Read more on Auto Trading. B Basket Option: A type of option that is based on a group of underlying securities rather than just one. Barrier Option: A type of option that can come into existence or go out of existence based on specific criteria is usually related to the price of the underlying security.

More about Barrier Options. Bear Butterfly Spread: This is an advanced strategy that can be used when the outlook of an underlying security is bearish. Learn how to use a Bear Butterfly Spread. Bear Call Spread: A simple strategy, using calls, that can be used when the expectation is that the underlying security will decline in price.

Options Trading Glossary - The Options Playbook

Learn how to use a Bear Call Spread. Bearish: An expectation that an option, or options trading terminology financial instrument, will decrease in price. Bearish Trading Strategies: Strategies that can be options trading terminology to profit from a downward move in the price of a financial instrument. List of Bearish Strategies. Bear Market: When the overall market is in decline. Bear Put Ladder Spread: This is an advanced strategy that can be used when the outlook on an underlying security is bearish.

Learn how to use a Bear Put Ladder Spread. Bear Put Spread: A simple strategy using options trading terminology that can be used when the expectation is that the underlying security will decline in price. Learn how to use a Bear Put Spread.

options trading terminology

Bear Ratio Spread: This is a strategy that can be used when the outlook on an underlying security is bearish. Learn how to use a Bear Ratio Spread. Bear Spread: A spread that is created to profit from bearish movements. Bear Trap: An unconfirmed market movement which suggests a bear market, but is unconfirmed and ends up with the market moving upwards. Bid Price: The price at which an option can be sold. Bid Ask Spread: The difference between the bid price and the ask price of an option.

An indicator of liquidity, and often referred to simply as the spread. Binary Option: A type of option that pays a fixed return if motivational option expires in the money or nothing if it expires at the money or out of the money. More about Binary Options. Read more about the Binomial Pricing Model.

Call Options For Beginners - Lesson 1: Call Options Terminology

Black Scholes Options Pricing Model: A pricing model that is based on factors that include the strike price, the price of the underlying security, the length of time until expiration, and volatility. Read about the Black Scholes Pricing Model. Box Spread: An advanced strategy that involves the use of arbitrage.

Options Trading Terminology and Definitions | Ally

Break Even Point: The price or price range of the underlying security at which a strategy will break even, with no profits and no losses. Breakout: When the price of a security moves above an existing resistance level or below an existing support level. The expectation is that the security will continue to move in the prevailing direction. Broker: An individual or a options trading terminology that executes orders to buy and sell financial instruments on behalf of clients.

Broker Commissions: The charge from a broker for executing orders on behalf of clients. Bull Butterfly Spread: This is a strategy that can be used when the outlook options trading terminology an underlying security is bullish. Learn how to use a Bull Butterfly Spread.

options trading terminology

Bull Call Ladder Spread: This is a strategy that can be used when the outlook on an underlying security is bullish. Learn how to use a Bull Call Ladder Spread. Bull Call Spread: A simple strategy, involving calls, which can be used when the expectation is that the underlying security will increase in price.

Options Definition

Learn how to use a Bull Call Spread. Bull Condor Spread: This is an advanced strategy that can be used when the outlook on an underlying security is bullish. Learn how to use a Bull Condor Spread. Bullish: An expectation that an option, or any financial instrument, will increase in price. Bullish Trading Strategies: Strategies that can be used to profit from an upward move in the price of a financial instrument. List of Bullish Strategies. Bull Market: When options trading terminology overall market is moving upwards.

Bull Put Spread: A simple strategy, involving puts, which can be used when the expectation is that the underlying security will increase in price.

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  • Binary Options Options that either pay you a fixed return when it ends up in the money by expiration or nothing at all.

Learn how to use a Bull Put Spread. Bull Spread: A spread that is created to profit from binary options profit per trade movements. Bull Trap: An unconfirmed market movement which suggests a bull market, but is unconfirmed and ends up with the market moving downward.

Butterfly Spread: This is an advanced strategy that can be used to profit from an underlying security remaining neutral. Learn how to use a Butterfly Spread.

Options Trading Definitions – Must Know Terms for Beginners

Buy to Close Order: An order that is placed when you want to close an existing short position through buying contracts that you have previously written. Read more about the Buy to Close Order. Buy To Open Order: An order that is options trading terminology when you want to open a new position through buying contracts.