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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. In-the-money (ITM)

  When the price of an Option has gone beyond its strike price, it is called in the ITM.

• 0 Feedbacks 18. Index Options

  Index Option is an Option contract where the underlying is an index like NIfty 50 or Bank Nifty.

• 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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