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Options Trading Glossary - Definitions, Abbreviations, Terminology and Meaning

Understand the meaning of popular words related to IPO.

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Options Trading Definitions, Abbreviations, Meanings

S No Term Definition Feedback
1Algo TradingAlgo trading involves leveraging software programs for automatic trading.0
2American OptionAmerican Options can be exercised on any day within the expiration date.0
3Assignment in OptionsThe Process to choose a buyer or a seller to honor the right of an Option contract is called Assignment.0
4At-the-money (ATM)When the price of an Option is equal its strike price, it is called in the ATM.0
5Bear Call SpreadA trade where you take a BUY and SELL position of an Option of same underlying and expiry but different strike prices.0
6Box SpreadAn arbitrage strategy involving Call & Put Option created to get risk less profit.0
7Box Spread StrategyAn Option arbitrage strategy used when the underlying is under priced.0
8Break-Even Point (BEP)A price wherein an Option contract is nether a profit nor a loss.0
9Bull Call SpreadA trade position where you take a BUY and SELL position of an Option of same underlying and expiry but of different strike prices.0
10Call OptionAn 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
11Cloud OrderA special feature offered by ICICI securities for traders to create and save orders anytime and execute it during market hours.0
12Delta Option GreekDelta measures by how much the price of an Option change with change in the price of its underlying.0
13European OptionEuropean Options can only be exercised on expiry date.0
14Exercising OptionsWhen a trader decides to exercise the right of an Option contract, it is called exercising the Option.0
15ExpiryThe last date, usually the last Thursday of the month, on which an Option contract expires.0
16Gamma Option GreekGamma measures the change in the Delta of an Option to change in its underlying.0
17In-the-money (ITM)When the price of an Option has gone beyond its strike price, it is called in the ITM.0
18Index OptionsIndex Option is an Option contract where the underlying is an index like NIfty 50 or Bank Nifty.0
19Long OptionA Long option is a position wherein a trader buys an Option.0
20Long positionWhen you buy an Option, it is called a Long position.0
21Lot SizeThe number of shares of the underlying in an Option contract is called Lot size.0
22Mark-to-Market Settlement (MTM)Marked-to-market, or mark-to-market (MTM) settlement, refers to the process by which the profit or loss made on an open position of a derivatives contract is adjusted on the same day from the trader's account.0
23Moving averagesIt is used to predict the direction of a particular trend of an Option.0
24Open Interest (OI)Open interest (OI) is a derivative indicator that refers to the total number of outstanding derivative contracts, such as options or futures, that are unsettled at a given point in the market.0
25Option GreeksOptions Greeks help a trader to ascertain change in the price of an Option due to change in various factors.0
26Option Market ParticipantsOn the basis of their risk appetite and trading apprroach, participants in Options market can be categorized into- Hedgers, Speculators and arbitrageurs.0
27Option Tick SizeThe minimum value by which the price of an Option contract can change.0
28Option Writer or Option writingAn Option Writer is one who sells or shorts an Option with holding the underlying of the Option.0
29Options ArbitrageA strategy where a trader takes multiple positions to minimize risk of his trade.0
30Options ChartOption chains are used to perform technical analysis of the underlying stock of an Option by traders.0
31Options ContractA 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
32Options Fair Market ValueIt is the theoretical price of an option calculated with the help of Options pricing models.0
33Options HedgingOption contracts are useful tool for hedging.0
34Options MarketA place where Options are bought and sold by traders.0
35Options PremiumThe price an Option buyer pays or an Option seller receives is called the premium of an Option.0
36Options Secondary MarketA market where previously issued options in the NSE and BSE are traded.0
37Options SpreadA spread is created by taking 2 positions of BUY and SELL of an Option of same underlying and expiration date.0
38Options Trading AppA mobile app for traders to make Options trades from anywhere, anytime.0
39Options WriterThe seller of an Option is called Option Writer.0
40Out-of-the-money (OTM)When the price of an Option has not reached its strike price, it is called in the OTM.0
41Over The Counter (OTC) OptionsOptions traded away from exchanges like NSE and BSE are called OTC Options.0
42Paired Option ContractsA contract where a trader can take take 2 different position on the same Option in a single order.0
43Post-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
44Pre-Market Trading hoursThe session is conducted between 9 to 9:15 AM and has 2 sessions of Order Entry and Order Matching period.0
45Put OptionAn 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
46Rho Option GreekRho measures the change in the price of an Option with every percentage change in the interest rates.0
47Short OptionA short Option is a position wherein a trader sells an Option.0
48Spot PriceThe current market price of the underlying of an Option is called Spot Price.0
49Squaring Off an OptionIt is selling an Option of the same underlying, expiration date and strike price which you have bought.0
50Strike price or exercise priceThe specific price for which an Option is purchased. The buyer gets the right to exercise his Option at this Price.0
51Synthetic positionIt is created using different types of Option to create one single Option.0
52Theta Option GreekTheta measures the change in the price of an Option with each passing day towards expiry.0
53Time decay or erosionThe decrease in the value of an Option with passage of time is called Time decay.0
54Uncovered call writingSelling a Call Option without holding its underlying.0
55Vega Option GreekVega measures the impact of the change in the volatility of the underlying on the price of its Option.0
56vertical spread option strategyIts a 2 legged strategy involving buying/selling of Call and Put Options.0
57VolatilityThe rate of change in the Price of the underlying of an Option is called Volatility.0
58Volume in OptionsIt is an indicator of the traders interest in a particular Option.0