Common Options Trading Terms
Ratio Calendar Spread
Selling more near-term options than longer-term ones purchased, all with the same strike; either puts or calls.
A strategy in which one has an unequal number of long securities and short securities. Normally, it implies a preponderance of short options over either long options or long stock.
Selling of call options in a ratio higher than 1 to 1 against the stock that is owned.
Return if Exercised
The return that a covered call writer would make if the underlying stock were called away
All option contracts of the same class that also have the same unit of trade, expiration date and strike price.
The official price at the end of a trading session. This price is established by The Options Clearing Corporation and is used to determine changes in account equity, margin requirements, and for other purposes.
A position wherein a person's interest in a particular series of options is as a net writer.
An order to simultaneously transact two or more option trades. Typically, one option would be bought while another would simultaneously be sold. Spread orders may be limit orders, not held orders, or orders with discretion
Any option position having both long options and short options of the same type on the same underlying security
The stated price per share for which the underlying security may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
A strategy equivalent in risk to purchasing a put option where an investor sells stock short and buys a call.
The collective name denoting the expiration date, striking price, and underlying stock of an option contract.
The portion of the option premium that is attributable to the amount of time remaining until the expiration of the option contract. Time value is whatever value the option has in addition to its intrinsic value.
Unit of Trading
The minimum quantity or amount allowed when trading a security. The normal minimum for common stock is 1 round lot or 100 shares. The normal minimum for options is one contract (which normally covers 100 shares of stock).
Most commonly used to describe the purchase of one option and sale of another where both are of the same type and same expiration, but have different strike prices. Also used to describe a delta-neutral spread in which more options are sold than are purchased.
If you did not find the term you were looking for here, you might try the CBOE Chicago Board Options Exchange. They have a broad selection of option terms and trading tools.