Glossary of Option Terms 

A Glossary of Option Terms (I to Q)

Index:
An index usually a collection of a basket of stocks to represent the overall market, it can be either broad based to represent the whole market or with more narrow focus to represent a certain market sector.
Interest Rate:
Usually expressed as a % of the principal, it is the charge levied for the risk of lending out money.
In the Money:
An option that generates a profit when exercised.
Intrinsic Value:
The amount by which a market is in the money. Out of the money options have no intrinsic value. Calls = underlying - strike price. Puts = strike price - underlying.
Large Cap Stocks:
Firm with capitalization of $5 billion or more.
Leverage:
Extend of borrowings or gearing.
LEAPS:
Long-term Equity AnticiPation Securities, available with expiration timing anywhere from 1 up to 3 years.
Limit Order:
An order to purchase or sell an equity at a pre-specified price.
Limit Up, Limit Down:
Maximum increase or decrease in price movements allowed by the exchange in the fluctuation of the price for a commodity within a trading day.
Liquidity:
A measure of how easy an asset can be bought or sold in a marketplace, determined by the market capitalization and number of participants.
Long Straddle:
A trade strategy or position the involving the purchase of both put and a long call, in which both options have the same expiration date and exercise price. Strategy
Margin Account:
A account in which a brokerage firm lends money to the customer to fund part of the purchase price of a trade.
Margin Call:
The requirement for a trader to deposit additional money into a margin account to maintain a trade position.
Mark-to-Market:
The day-to-day adjustment of margin accounts pegged to latest market prices.
Market Maker:
An exchange member that buy and sell shares or contracts in a designated market. Market makers must be ready to both buy and sell in order to facilitate trading, especially in an illiquid market to keep the market somewhat liquid.
Mid-Cap Stocks:
Firms with capitalization of between $1 billion to $5 billion.
Momentum:
When a market continues in the same direction for a certain time frame, the market is said to have momentum.
Momentum Indicator:
A technical indicator utilizing price and volume statistics for predicting the strength or weakness of a current market.
Momentum Trading:
Trading according to the momentum of the market, usually refers to short or mid term trading
Moving Averages:
The moving average is probably the best known, and most versatile, technical indicator. A mathematical procedure in which the sum of a value plus a selected number of previous values are divided by the total number of values. Used to smooth or eliminate the fluctuations in data and to assist in determining when to buy and sell.
Naked Option:
An option sold without the possession of the underlying position.
Naked Position:
A securities position not hedged from market risk.
NASDAQ:
National Association of Securities Dealers Automated Quotations system -- a computerized system providing brokers and dealers with price quotations for securities traded over-the-counter as well as for many New York Stock Exchange listed securities.
Near the Money:
An option with a strike price close to the current price of the underlying security. Sometimes referred to as being at the money.
Net Change:
The daily change from time frame to time frame. For example, the change from the close of yesterday to the close of today.
Net Profit:
The overall profit of a trade, after counting fees and brokerage.
New York Stock Exchange (NYSE):
The largest stock exchange in the United States.

Offer:
The lowest price at which a person is willing to sell. Also known as the Ask.
Off-floor Trader:
A trader who does not trade on the actual floor of an organized futures of stock exchange.
On the Money:
The option is trading at its exercise price (also referred to as at the money).
Open Order:
An order to buy or sell a security at a specified price, valid until executed or cancelled.
Open Trade:
A current trade that is still held active in a customer's account.
Opening:
The period at the beginning of the trading session at an exchange.
Option:
The buyer of an option contract reserves the right, but not the obligation, to buy or sell a specified amount of an underlying security at a predetermined price within a specified time.
Option Holder:
The buyer of either a call or put option.
Option Income Funds:
Funds that derived returns from selling call options on the stocks it owned.
Option Premium:
Price of an option.
Option Writer:
The seller of either a call or put option.
Option Stock:
Refers to equities that are converted from options granted by company to employees after the exercise. More about Option Stock
Order Flow:
The volume of orders being bought or sold on the exchanges.
Out-of- the-Money-Option:
Refers to options which has zero intrinsic value. An option with a strike price higher than the market price for calls and below the market price for puts.
Outstanding Option:
An options contract issued by the Option Clearing Corporation that remains open. i.e. Options that has not expired nor being exercised.
Overhang:
A block of securities (usually large in size) that when released to the market, will cause the price of the instrument (e.g. stocks) to be reduced.
Overvalued:
A term used to describe a security or option whose current price is not justified.
Premium:
The price that a option buyer pays to an option seller.
Put Option:
It is a contract between two parties, namely buyer (holder) and seller (writer). The holder has the right (but not obligated) to sell an financial instrument (or termed as underlying, which can be a commodity, futures, stock indices, equities or even debt instruments) by a certain due date (also term maturity or expiration) for a certain pre-determined price (termed as strike or exercise). As the counter party, the seller is obligated to buy at the exercise price.
Pyramiding:
The adding on of positions from an initially larger trade size to subsequently smaller and smaller trade size.
Quoted Price:
Refers to the price at which the last sale and purchase of a particular security or commodity took place.

Glossary of Option Terms (A to C) - Glossary of Option (A-C)

Glossary of Option Terms (D to H)  - Glossary of Option (D-H)

Glossary Option (I to Q) - Glossary of Option (I-Q)

Glossary of Option (R - Z)- Glossary of Option (R-Z)

Option Stock - Some Useful Information

Option Greeks - A Qualitative Explanation

Glossary of Option Terms from Reuters - Glossary page of Reuters

Chicago Board Option Exchange Glossary - Glossary page of CBOT

Investorswords Glossary - A website for very complete list of financial glossary.

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