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Options STU

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S

The Securities and Exchange Commission is an agency of the federal government and is in charge of monitoring and regulating the securities industry.
An option strategy where trader sells a Put option and the position is secured with the cash in the account in the event that trader must perform and purchase the stock. See Cash Covered Put.
The transfer of shares of the underlying instrument when one option contract is exercised by the holder and the obligation assigned to the writer.
This is when a trader sells an option contract to open a position. By shorting the option the writer (seller) takes on the obligation to perform in the event the option is exercised or assigned to the writer. The writer can always buy back the option and relieve himself/herself of the obligation inherent with a short position.
a strategy whereby a trader sells an option and buys the same type of option to create a debit or credit spread. You can buy a Call and sell a Call or buy a Put and sell a Put.
A statistical measure of price fluctuation and how the price is distributed about the mean. This measurement provides a good read as to the volatility of the security.
When a corporation issues cash pay out for every stock held by the shareholder.
This is an increase in the number of outstanding shares issued by the corporation. For example: shareholder owns 250 shares at $40 per share, the corporation issues a 2 for 1 split, so the 250 shares will be multiplied by 2 and now equal 500 shares and the price is divided in half from $0 to $0 per share. Shareholder started out with shares worth $1,000 and now has more shares, but the net worth is still only $1,000.
An order placed with the broker which directs the shares to be sold if and when the stock price reaches, or passes through, the specified price placed with the broker. Once the parameters are reached the order becomes a market order and the position is liquidated.
An order placed with the broker which becomes a limit order when the specified price is reached.
A strategy involving two legs, one on the Call and the other on the Put side. Both legs have the same strike price, expiration and re placed on the same underlying security. When both legs are Long positions it is called a Long Straddle and when both legs are Short positions it is called a Short Straddle.
This is the price at which the buyer and the seller agree to be the exercise price in the event there is an exercise or assignment of the option. If the buyer wants to buy this is the buying amount and when the seller has to sell this is his selling amount.
This is a point where the stock has stopped form dropping and has become supported by a previous selling point and now the stock price has started to increase again. This is based on technical analysis and it is used to determine the entry and exit of a trade.

T

The use and study of charts and the historical prices, trading volume and other indicators in relationship to each other and to price. The data is used to determine when a trader should enter or exit a trade, and in many cases, what strategy to use based on the analysis.
Estimated value of an option based on a mathematical formula. The most used formula is the Black-Scholes Formula
This reflects the measure of change in an option's theoretical value as a result of change in time to the option's expiration date. Simply put, it is the erosion of premium of an option as a result of passage of time. The closer the time to expiration the faster the time decay.
The minimum price measurement of an option's bid or ask.
The value of an option's premium due strictly to the remaining time element of the option. Time value is any value above that of the intrinsic value (actual value).
A trading range is the spread between the high and low prices traded during a period of time.

U

A short position, written by the trader, which is not collateralized by an underlying security or a Long Call position. The potential of loss of principal on this trade is unlimited.
A short position, written by the trader, which is not collateralized by a Long Put position, but only by cash.
The security being purchased or sold. I use it in place of stock just in case someone is trading an ETF or some other security other than a stock.

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