Glossary of Option Terms

A Glossary of Option Terms (D to H)

Daily Range:
The difference between the high and low price of a security in one trading day.
Day Order:
An order to buy or sell a security which expires if not filled by the end of the day.
Day Trading:
A trading style in which the same position is entered and exited within one day.
Deep-in-the-Money:
A deep-in-the-money call option has a strike price well below the current price of the underlying instrument. A deep-in-the-money put option has a strike price well above the current price of the underlying instrument.
Delta:
The amount by which the price of an option changes for every dollar move in the underlying instrument.
Delta-Hedged:
An options strategy protecting an option against price changes in the option's underlying instrument by balancing the overall position delta to zero.
Delta Neutral:
A position arranged by selecting a calculated ratio of put and call positions that balance out to an overall position delta of zero.
Delta Position:
A measure of option or underlying securities delta.
Derivative:
Financial instruments based on the market value of an underlying asset.
Discount Brokers:
Brokerage firms that offer lower commission rates than full service brokers, but do not offer services such as advice, research and portfolio planning.
Divergence:
When indicators fail to show confirming trends.
Dividend:
A sum of money paid out to a shareholder from the stock's profits.
Dollar Cost Averaging:
The technique of investing a certain amount of money (usually fixed) on a periodic and regular basis. The reason for doing so is based on the belief that it will negate the effect of market timing and benefit from the fact that overall stocks prices/market keep moving up in the long term.
Dow Jones Industrial Average (DJIA):
Used as an overall indicator of market performance, this average is composed of 30 blue chip stocks which are traded daily on the New York Stock Exchange.
Downside:
The potential for prices to decrease.
Downside Risk:
The potential risk one takes if prices decrease in directional trading.
European Style Option:
An option contract that can only be exercised on the expiration date. Note: Use European and End to help you to remember
Exchange:
An area where an asset, option, future, stock or derivative is bought and sold.
Execution:
The process of completing an order to buy or sell securities.
Exercise:
Implementing an option's right to buy or sell the underlying security.

Exercise Price:
A price at which the stock or commodity underlying a call or put option can be purchased (call) or sold (put).
Expiration:
The date and time after which an option may no longer be exercised.
Expiration Date:
The last day on which an option may be exercised.
Extrinsic Value:
The price of an option less its intrinsic value. An out-of-the money option's worth consists of nothing but extrinsic or time value.
Gamma:
The degree by which the delta changes with respect to changes in the underlying instrument's price.
Gap:
A day in which the daily range is completely above (gap up) or below (gap down) the previous day's daily range.
Good Till Cancelled Order (GTC):
An order to buy or sell stock that is good until you cancel it.
Fair Market Value:
The value of an asset under normal conditions.
Fair Values:
The theoretical value of what an option should be worth, calculated by an option pricing model such as Black-Scholes.
Fill:
An executed order.
Fill Order:
An order that must be filled or canceled immediately.
Financial Instruments:
The term used for debt instruments.
Floor Broker:
An exchange member who is paid a fee for executing orders.
Floor Trader:
An exchange member who executes orders from the floor of the exchange only for his/her own account.
Fluctuation:
A variation in the market price of a security.
Front Month:
The first expiration month in a series of months.
Fundamental Analysis:
An approach to trading research to predict price movements based on a balance sheet and income statements, past records of earnings, sales, assets, management, products and services.
Futures:
All contracts covering the purchase and sale of financial instruments or physical commodities for future delivery. These orders are transacted on a commodity futures exchange.
Futures Contract:
Usually traded in the futures exchange-trading floor, it is used to buy or sell a particular commodity or financial device at a prearranged price in the future. Futures contracts detail the quantity and quality of the underlying asset; unlike forward contract they are standardized product.
Hedge:
Reducing the risk of loss by initiating a position through options or futures opposite to the existing position held underlying security.

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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