In-The-Money
An adjective used to describe an option that has intrinsic value.
Intrinsic value
The value of the in-the-money part of the price of an option
Iron butterfly
An option strategy with limited risk and limited profit potential that involves both a long (or short) straddle, and a short (or long) combination
Listed option
A put or call traded on a national options exchange
Market quote
A quotation of the current best bid / asks prices for an option or stock in the marketplace (a currency exchange trading floor)
Option
A contract that gives the owner the right, but not the obligation, to buy or sell a particular asset (the underlying asset) at a fixed price (the strike price) for a specific period of time (until expiration)
Option lifetime
The time from when an option contract is created by a writer of that option to the expiration date
Option writer
The option seller who is obligated to meet the conditions of an option contract
OTC option
An over-the-counter option is one which is traded in the over-the-counter market.
Out-of-the-money option
A term used for an option that has no intrinsic value
Profit/loss graph
A chart showing the potential profit and loss of an investment strategy
Put option
An option contract that gives the owner the right but not the obligation to sell the underlying asset at a specified price (its strike price) for a certain, fixed period of time (until its expiration)
Short option position
The position of an option writer which represents an obligation on the part of the option's writer to meet the terms of the option if it is exercised by its owner
Straddle
A trading position in which puts and calls have exactly the same strike, expiration, and underlying asset
Strike / strike price
The price at which the owner of an option can purchase (call) or sell (put) the underlying stock.
Time value
The part of an option's total price that exceeds its intrinsic value
Underlying security
The security subject to being purchased or sold upon exercise of the option contract
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