Option financial instrument granting rights to purchase or sell stock for a limited period of time at a particular price.
Put the right (but not the obligation) to sell shares of a stock at a pre-determined price for a limited period.
Call the right (but not the obligation) to buy shares of a stock at a pre-determined price for a limited period.
At-the-money (ATM) a strike or option very close to the current stock price.
In-the-money (ITM) a strike or option with intrinsic value
Out-of-the-money (OTM) a strike or option with time value only
Strike an even price for a stock such as 110, 115, 120
Butterfly a 3-legged option spread that allows a buyer or seller to trade the time decay of a selected strike
Iron Condor a 4-legged options spread that allows a trader to collect time premium between fixed strikes
Theta the daily measure in dollars of the time value of an option.
Range the difference between high and low prices of a stock over a fixed period five days or one year
Probability the calculated percentage of an event occurring
Profit the amount of money as credit resulting from the purchase and sale of an asset
Loss the amount of money as debit resulting from the purchase and sale of an asset
Risk the total amount of capital that could be lost in a trade
Risk Profile a graph showing the risk of a trade over a price range
Margin amount segmented in the account to cover potential risk
Time Decay the general reduction in time value of an option
“Good ’Til Cancelled” (GTC) is an instruction on the trade order to keep the order open until filled
Volatility a measure of the recurring highs and lows of an asset over time
Array a group of Butterflies evenly spread across a price range
Maximum Available Credit (MAC) the greatest amount any spread can be sold for at a particular time
Maximum Net Credit (MNC) the greatest amount a spread can be sold for minus the cost of purchase
Iron Fly combination of Butterfly and Iron Condor, using both Puts and Calls
Batman Butterfly an options strategy using an OTM Put Butterfly and an OTM Call Butterfly (looks like the Batman symbol)
Broken Wing Butterfly a variant in which the far leg is moved even further out, creating an uneven spread with an overall credit.
Pinning the tendency of a stock price to gravitate to a strike at expiration
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OPTION
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