Premium - The premium is the amount that you pay up front for the option. This amount is once-off and non-refundable.
Strike Price - The strike price is the amount that you agree to pay for the stock at a later date.
Underlying Stock - The underlying stock is the stock for which you are purchasing the option.
Exercising Options - . By exercising an option, you are using your right to buy, and actually purchasing the underlying stock.
Expiration Date - The expiration date is the last day for you to exercise your option. If you don't exercise it by then, your option will expire worthless. In the United States, the expiration date is the 3rd Friday of the month. So if you have a June option, that option will expire on the 3rd Friday of June.
American Options - American options are options (not limited by any geographic boundaries) that allow you to exercise the options at any time until the expiration date.
European Options - European options are options (not limited by any geographic boundaries) that allow you to exercise the options at only the expiration date. Do check with your local Options Exchange which form of options are used in your country.
Contract - Option trading is carried out in numbers of contracts. One contract equates to 100 underlying shares. If you buy one call option contract, you are buying the right to buy 100 shares of the underlying stock.
More to come... soon
Sunday, July 15, 2007
Frequently used terms in options
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7 comments:
please include some live case studies and examples. What so ever you are writing is good from acedamic point of view.
Hi Anon,
I hope u understand i cannot just write about case studies at the first go. it will come but it will take time . i took around 6-7 months before i started paper trading options :) it takes time. unless basics are clear how can u start trading in options.
This site is definitely not for experts like you :) its written by a novice like me and i am still learning :)
hi
nice work, but would like to see more about pricing, Black-Scholes and even Cox-Ross-Ingersoll stuff.
Hey Anon,
I will come to it soon let me built a base. I will surely come to that level.. ie technical :)
hello
Your blog is very lucid and help
Hats off for you effort.
Just keep up the good work.
Cheers
thanks a lot rainman.. i will try to write mor articles in near time..
hope it helps
Hi,
Great blog!! Keep it up. I will be eagerly looking for more....
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