A Accumulation – When stocks start moving sideways after a significant drop as investors start accumulating. Adjusted Options – Non-standardized stock options with customized terms in order to price in major changes in the difference between stop and limit in currency trading stock’s capital structure.
Read the full tutorial on Adjusted Options. Order – An order that must be completely filled or else it will not be executed. This is a useful order for option traders executing complex option strategies which needs to be precisely filled. Read The Tutorial On American Style Options.
Arbitrage – The simultaneous purchase and sale of financial instruments in order to benefit from price discrepancies. Option traders frequently look for price discrepancies of the same option contract between different option exchanges, thereby benefiting from a risk free trade. Ask Price- As used in the phrase ‘bid and asked’ it is the price at which a potential seller is willing to sell. Another way of saying this is the asking price for what someone is selling. You buy option contracts and stocks on their Ask price. The writer receives an assignment notice from the Options Clearing Corporation.
At the Money – When an option’s strike price is the same as the prevailing stock price. Read More About At The Money Options. B Backspread – see Reverse Strategy. Barrier Options -Exotic options which comes into existence or goes out of existence when certain prices has been reached.
Read More About Barrier Options Here! Bearish – An opinion that expects a decline in price, either by the general market or by an underlying stock, or both. Bearish Options Strategies – Different ways to use options in order profit from a downwards move in the underlying stock. Read the tutorial on Bearish Options Strategies. Bear Spread – an option strategy that makes its maximum profit when the underlying stock declines and has its maximum risk if the stock rises in price.
The strategy can be implemented with either puts or calls. In either case, an option with a higher striking price is purchased and one with a lower striking price is sold, both options generally having the same expiration date. Bear Trap – Any technically unconfirmed downward move that encourages investors to be bearish. It usually precedes strong rallies and often catches the unwary. Beta – A figure that indicates the historical propensity of a stock price to move with the stock market as a whole.
Bid Price – The price at which a potential buyer is willing to buy from you. This means that you sell at the Bid Price. Ask Spread – The difference between the prevailing bid and ask price. Binary Options – Options that either pay you a fixed return when it ends up in the money by expiration or nothing at all.
Black-Scholes Model – A mathematical formula designed to price an option as a function of certain variables-generally stock price, striking price, volatility, time to expiration, dividends to be paid, and the current risk-free interest rate. Box Spread – A complex 4 legged options trading strategy meant to take advantage of discrepanies in options prices for a risk-free arbitrage. It generally pertains to the result at the expiration date of the options involved in the strategy. A “dynamic” break-even point is one that changes as time passes.
Breadth – The net number of stocks advancing versus those declining. When advances exceed declines the breadth of the market is inclining. When the declines exceed advances the market is declining. Breakout – What occurs when a stock price or average moves above a previous high resistance level or below a previous low support level. The odds are that the trend will continue. Bullish – An opinion in which one expects a rise in price, either by the general market or by an individual security. Bullish Options Strategies – Different ways to use options in order profit from an upwards move in the underlying stock.