Options Trading Glossary - Definitions, Abbreviations, Terminology and Meaning

Understand the meaning of popular words related to Options Trading.

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0 Feedbacks 1. Algo Trading
Algo trading involves leveraging software programs for automatic trading.
0 Feedbacks 2. American Option
American Options can be exercised on any day within the expiration date.
0 Feedbacks 3. Assignment in Options
The Process to choose a buyer or a seller to honor the right of an Option contract is called Assignment.
0 Feedbacks 4. At-the-money (ATM)
When the price of an Option is equal its strike price, it is called in the ATM.
0 Feedbacks 5. Bear Call Spread
A trade where you take a BUY and SELL position of an Option of same underlying and expiry but different strike prices.
0 Feedbacks 6. Box Spread
An arbitrage strategy involving Call & Put Option created to get risk less profit.
0 Feedbacks 7. Box Spread Strategy
An Option arbitrage strategy used when the underlying is under priced.
0 Feedbacks 8. Break-Even Point (BEP)
A price wherein an Option contract is nether a profit nor a loss.
0 Feedbacks 9. Bull Call Spread
A trade position where you take a BUY and SELL position of an Option of same underlying and expiry but of different strike prices.
0 Feedbacks 10. Call Option
An Option contract where the buyer gets the right but not the obligation to buy an underlying at a specified price and within a specified period.
0 Feedbacks 11. Cloud Order
A special feature offered by ICICI securities for traders to create and save orders anytime and execute it during market hours.
0 Feedbacks 12. Delta Option Greek
Delta measures by how much the price of an Option change with change in the price of its underlying.
0 Feedbacks 13. European Option
European Options can only be exercised on expiry date.
0 Feedbacks 14. Exercising Options
When a trader decides to exercise the right of an Option contract, it is called exercising the Option.
0 Feedbacks 15. Expiry
The last date, usually the last Thursday of the month, on which an Option contract expires.
0 Feedbacks 16. Gamma Option Greek
Gamma measures the change in the Delta of an Option to change in its underlying.
0 Feedbacks 17. Index Options
Index Option is an Option contract where the underlying is an index like NIfty 50 or Bank Nifty.
0 Feedbacks 18. In-the-money (ITM)
When the price of an Option has gone beyond its strike price, it is called in the ITM.
0 Feedbacks 19. Long Option
A Long option is a position wherein a trader buys an Option.
0 Feedbacks 20. Long position
When you buy an Option, it is called a Long position.
0 Feedbacks 21. Lot Size
The number of shares of the underlying in an Option contract is called Lot size.
0 Feedbacks 22. Moving averages
It is used to predict the direction of a particular trend of an Option.
0 Feedbacks 23. Open Interest (OI)
It is a popular indicator to identify the traders interest in a particular Option.
0 Feedbacks 24. Option Greeks
Options Greeks help a trader to ascertain change in the price of an Option due to change in various factors.
0 Feedbacks 25. Option Market Participants
On the basis of their risk appetite and trading apprroach, participants in Options market can be categorized into- Hedgers, Speculators and arbitrageurs.
0 Feedbacks 26. Option Tick Size
The minimum value by which the price of an Option contract can change.
0 Feedbacks 27. Option Writer or Option writing
An Option Writer is one who sells or shorts an Option with holding the underlying of the Option.
0 Feedbacks 28. Options Arbitrage
A strategy where a trader takes multiple positions to minimize risk of his trade.
0 Feedbacks 29. Options Chart
Option chains are used to perform technical analysis of the underlying stock of an Option by traders.
0 Feedbacks 30. Options Contract
A contract that gives you as a buyer the right, but not the obligation, to sell an underlying asset at a specified price and on a specific date.
0 Feedbacks 31. Options Fair Market Value
It is the theoretical price of an option calculated with the help of Options pricing models.
0 Feedbacks 32. Options Hedging
Option contracts are useful tool for hedging.
0 Feedbacks 33. Options Market
A place where Options are bought and sold by traders.
0 Feedbacks 34. Options Premium
The price an Option buyer pays or an Option seller receives is called the premium of an Option.
0 Feedbacks 35. Options Secondary Market
A market where previously issued options in the NSE and BSE are traded.
0 Feedbacks 36. Options Spread
A spread is created by taking 2 positions of BUY and SELL of an Option of same underlying and expiration date.
0 Feedbacks 37. Options Trading App
A mobile app for traders to make Options trades from anywhere, anytime.
0 Feedbacks 38. Options Writer
The seller of an Option is called Option Writer.
0 Feedbacks 39. Out-of-the-money (OTM)
When the price of an Option has not reached its strike price, it is called in the OTM.
0 Feedbacks 40. Over The Counter (OTC) Options
Options traded away from exchanges like NSE and BSE are called OTC Options.
0 Feedbacks 41. Paired Option Contracts
A contract where a trader can take take 2 different position on the same Option in a single order.
0 Feedbacks 42. Post-market Trading Hours (Post Close Trading Session)
A session conducted between 3:40 to 4: 00 PM for trading shares at a fixed predetermined price.
0 Feedbacks 43. Pre-Market Trading hours
The session is conducted between 9 to 9:15 AM and has 2 sessions of Order Entry and Order Matching period.
0 Feedbacks 44. Put Option
An Option contract where the buyer gets the right but not the obligation to sell an underlying at a specified price and within a specified period.
0 Feedbacks 45. Rho Option Greek
Rho measures the change in the price of an Option with every percentage change in the interest rates.
0 Feedbacks 46. Short Option
A short Option is a position wherein a trader sells an Option.
0 Feedbacks 47. Spot Price
The current market price of the underlying of an Option is called Spot Price.
0 Feedbacks 48. Squaring Off an Option
It is selling an Option of the same underlying, expiration date and strike price which you have bought.
0 Feedbacks 49. Strike price or exercise price
The specific price for which an Option is purchased. The buyer gets the right to exercise his Option at this Price.
0 Feedbacks 50. Synthetic position
It is created using different types of Option to create one single Option.
0 Feedbacks 51. Theta Option Greek
Theta measures the change in the price of an Option with each passing day towards expiry.
0 Feedbacks 52. Time decay or erosion
The decrease in the value of an Option with passage of time is called Time decay.
0 Feedbacks 53. Uncovered call writing
Selling a Call Option without holding its underlying.
0 Feedbacks 54. Vega Option Greek
Vega measures the impact of the change in the volatility of the underlying on the price of its Option.
0 Feedbacks 55. vertical spread option strategy
Its a 2 legged strategy involving buying/selling of Call and Put Options.
0 Feedbacks 56. Volatility
The rate of change in the Price of the underlying of an Option is called Volatility.
0 Feedbacks 57. Volume in Options
It is an indicator of the traders interest in a particular Option.

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