Options Trading Glossary - Definitions, Abbreviations, Terminology and Meaning

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Options Trading Definitions, Abbreviations, Meanings

S No	Term	Definition
1	Long position	When you buy an Option, it is called a Long position.
2	At-the-money (ATM)	When the price of an Option is equal its strike price, it is called in the ATM.
3	Out-of-the-money (OTM)	When the price of an Option has not reached its strike price, it is called in the OTM.
4	In-the-money (ITM)	When the price of an Option has gone beyond its strike price, it is called in the ITM.
5	Exercising Options	When a trader decides to exercise the right of an Option contract, it is called exercising the Option.
6	Vega Option Greek	Vega measures the impact of the change in the volatility of the underlying on the price of its Option.
7	Theta Option Greek	Theta measures the change in the price of an Option with each passing day towards expiry.
8	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.
9	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.
10	Options Writer	The seller of an Option is called Option Writer.
11	Volatility	The rate of change in the Price of the underlying of an Option is called Volatility.
12	Assignment in Options	The Process to choose a buyer or a seller to honor the right of an Option contract is called Assignment.
13	Options Premium	The price an Option buyer pays or an Option seller receives is called the premium of an Option.
14	Lot Size	The number of shares of the underlying in an Option contract is called Lot size.
15	Option Tick Size	The minimum value by which the price of an Option contract can change.
16	Expiry	The last date, usually the last Thursday of the month, on which an Option contract expires.
17	Time decay or erosion	The decrease in the value of an Option with passage of time is called Time decay.
18	Spot Price	The current market price of the underlying of an Option is called Spot Price.
19	Uncovered call writing	Selling a Call Option without holding its underlying.
20	Rho Option Greek	Rho measures the change in the price of an Option with every percentage change in the interest rates.
21	Over The Counter (OTC) Options	Options traded away from exchanges like NSE and BSE are called OTC Options.
22	Option Greeks	Options Greeks help a trader to ascertain change in the price of an Option due to change in various factors.
23	Options Hedging	Option contracts are useful tool for hedging.
24	Options Chart	Option chains are used to perform technical analysis of the underlying stock of an Option by traders.
25	Open 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.
26	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.
27	Mark-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.
28	vertical spread option strategy	Its a 2 legged strategy involving buying/selling of Call and Put Options.
29	Moving averages	It is used to predict the direction of a particular trend of an Option.
30	Options Fair Market Value	It is the theoretical price of an option calculated with the help of Options pricing models.
31	Squaring Off an Option	It is selling an Option of the same underlying, expiration date and strike price which you have bought.
32	Synthetic position	It is created using different types of Option to create one single Option.
33	Volume in Options	It is an indicator of the traders interest in a particular Option.
34	Index Options	Index Option is an Option contract where the underlying is an index like NIfty 50 or Bank Nifty.
35	Gamma Option Greek	Gamma measures the change in the Delta of an Option to change in its underlying.
36	European Option	European Options can only be exercised on expiry date.
37	Delta Option Greek	Delta measures by how much the price of an Option change with change in the price of its underlying.
38	Option Writer or Option writing	An Option Writer is one who sells or shorts an Option with holding the underlying of the Option.
39	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.
40	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.
41	Box Spread Strategy	An Option arbitrage strategy used when the underlying is under priced.
42	Box Spread	An arbitrage strategy involving Call & Put Option created to get risk less profit.
43	American Option	American Options can be exercised on any day within the expiration date.
44	Algo Trading	Algo trading involves leveraging software programs for automatic trading.
45	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.
46	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.
47	Options Arbitrage	A strategy where a trader takes multiple positions to minimize risk of his trade.
48	Options Spread	A spread is created by taking 2 positions of BUY and SELL of an Option of same underlying and expiration date.
49	Cloud Order	A special feature offered by ICICI securities for traders to create and save orders anytime and execute it during market hours.
50	Short Option	A short Option is a position wherein a trader sells an Option.
51	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.
52	Break-Even Point (BEP)	A price wherein an Option contract is nether a profit nor a loss.
53	Options Market	A place where Options are bought and sold by traders.
54	Options Trading App	A mobile app for traders to make Options trades from anywhere, anytime.
55	Options Secondary Market	A market where previously issued options in the NSE and BSE are traded.
56	Long Option	A Long option is a position wherein a trader buys an Option.
57	Paired Option Contracts	A contract where a trader can take take 2 different position on the same Option in a single order.
58	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.

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