Glossary of Option Terms 

A Glossary of Option Terms (A to C)

American Style Option:
Refers to option contract that can be converted to shares at any time from the time of purchase till the option due date.
AMEX
American Stock Exchange.
Annual Return:
Return earned by an investing in a financial instrument for any given year.
Appreciation:
Refers to the positive return in value of investment instrument or asset.
Arbitrage:
Usually done by professional traders with the purchase and sale of similar investment instruments simultaneously to make a risk free profit.
Ask Price:
The price in which a seller is willing to sell the financial instrument.
Assignment:
Notice given to the call option seller that he is require to sell the underlying stock or to purchase the underlying stock in the case of a put option seller, at the predetermined strike price.
At-the-Money:
At-the-money refers to option in which the strike price is equal to the current market price of the stock.
Automatic Exercise:
A automatic procedure whereby the in-the-money option are exercised on behalf of the option buyer by the clearing firm.
Averaging Up /Down:
Averaging up means the purchase of more securities as the price increases whereas in averaging down, the purchase is done when the securities are at lower prices.
Back-Testing:
Testing of a trading system or methodology based on historical data to evaluate the validity
Bearish:
Having a view that the market/stock is going to move down.
Bear Call Spread:
An option trading strategy in which a trader write a call of lower strike and buys a call of higher strike simultaneously, establishing a position with both limited risk and profit.
Bear Spread:
A strategy which can be implemented either via put or call options. This strategy has the maximum profit when the underlying stock decline and maximum loss if the stock rises in price.
Bear Market:
A downward trending market over a long period of time usually as a result of soft economy.
Bid Price:
Price at which a buyer is willing to pay to buy a stock or an option
Bid-Ask Spread:
The price difference between the buying and selling prices of an instrument.
Breakout:
An upward move in the price of stock beyond its resistance level or a decline under the support level in a price chart.
Bull Call Spread:
An option trading strategy in which a trader buys a lower strike call and sells a higher strike call to create a position with both limited profit and risk.
Bull Market:
A continuous up trending stock market over an extended period.
Butterfly Spread:
The simultaneous selling or buying of two identical options, along the buying of one lower and higher strike price option each. This strategy is used on all call or all put options, on the same equity and expiration date.
Buy on Close:
An order to buy at the end of a trading session at a price within the closing range.
Buy on Open:
An order issued to buy the security at the starting of market open.

Calendar Spread:
A spread consisting of one long and short option (can be either call or put but both the same) each which expires in different months with the same exercise price.
Call Option:
An option contract which grant the buyer (who pays a price also known as premium) of the option the right (but not obligation), to purchase the underlying security in a specified time at a certain strike price.
Chicago Board Options Exchange (CBOE):
An options exchange in the United States which is one of the largest..
Chicago Board of Trade (CBOT):
Commodity Exchange in the US.
Class of Options:
Option contracts of the same type (call or put), style and underlying security.
Clearinghouse:
An institution established separately from the exchanges to ensure timely payment and delivery of securities.
Commission:
A service charge by a broker in return for arranging the purchase or sale of a security.
Commodity:
Any bulk good traded on an exchange (for example, metals, grains and meats).
Commodity Futures Trading Commission (CFTC):
Created in 1974 to ensure the open and efficient operation of the futures markets.
Contango:
Refers to a carrying charge market.
Contract:
A agreement in the trading of option, refers to a single unit of option, usually represents 100 shares in the case of equity trades.
Correction:
A sudden decline in the price of a security after a period of market strength.
Covered Call:
A call option position against a long position in an underlying stock or futures.
Covered Put:
A put option position against a short position in an underlying stock or futures.
Credit Spread :
The difference in value between 2 options, where the value of the put position exceeds the value of the call position.

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.

Please Read Disclaimer