Technical
Analysis - In order to predict
the future direction of the market, technical analysis
based on options volume is a very powerful tool.
Options Trading
- When volatility is at high levels and the stop loss
point on a particular stock is at about the same price
as the cost of an option, Options are the preferred
vehicle.
Call Put
Ratio - To calculate the
Put/Call ratio, divide the volume of put option
contracts by the volume of call option contracts.
Chicago Board Options Exchange (CBOE) calculates this
ratio.
Expiration Cycle - Expiration
dates applicable to options of listed securities is
referred to Expiration Cycle. There are three major
cycles for options (not LEAPs).
Options Expiration Strike -
The price and date at which an option can be exercised,
is the Strike Price and Expiration Date...
Stock Options -
As a form of compensation, some companies issue stock
options to employees. Incentive Stock Options (ISO), or
Nonqualified Stock Options (NSO) is the general form
which these stock options take.
Intrinsic
Value - An option has
intrinsic value when it is in-the-money. For an
in-the-money call the intrinsic value is equal to the
underlying asset price less the strike price.
Index Trading
- Unpredictable events such as news, rumors and earnings
reports fluctuate the price and volume for individual
stocks.
LEAPS
- Leverage is one of the great advantages that options
provide. For a small amount of money, you can control a
large holding in an asset.
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Options
Margin Requirements - When an investor
borrows money from a brokerage house to
cover part of the purchase of a security, an
investor is borrowing on margin.
Naked
Options - When an investor sells a
call option without owning the underlying
asset or without depositing funds to cover
the exercise value of the call, a naked call
(uncovered call) occurs.
Stock Options - Nonqualified Stock
Options are generally easier to establish
and administer and are generally less
restrictive than Incentive Stock Options.
Beta -
How a stock’s movement correlates to the
movement of the overall stock market is
measured by beta. Beta is related to but is
not the same as volatility.
Bid Ask
- Commonly used options terminology
Options
Price - Option pricing techniques have
reached a level of sophistication that
transformed the option trading market into
the hugely lucrative industry that it is
today.
Options Pricing - The Binomial Model for
pricing American stock options was founded
by Cox, Ross, and Rubenstein in 1979.
Options
Style - Options that can be exercised
anytime up to their expiration date, are
American Style Options (American Options).
Options
Volatility - The Volatility of an asset,
which usually is quoted as the annual
standard deviation of an asset’s price,
provides a measure of the random variability
or dispersion of price per unit of time. |
Options Glossary
- list of the most used terms in the options trading
Sell Buy
Options - By comparing the benefits (outlined in the
table above) of selling short options and of buying long
options, it becomes evident that option sellers have
more opportunities to profit.
Market Timing
- Options Market Timing is a method of analyzing past
trends in options volume and options cash volume, to
accurately forecast the future direction of the market.
QQQQ
- The QQQQ is ETF (Exchange Traded Fund) that tracks the
NASDAQ 100 Index.
