13428078
Description
Flashcards by ELITE IIVII, updated more than 1 year ago
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Created by ELITE IIVII
over 6 years ago
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| Question | Answer |
| At-The-Money (ATM) | A term that describes an option with a strike price that is equal to the current market price of the underlying stock. |
| Time Decay | A term used to describe how the theoretical value of an option erodes or declines with the passage of time. Time decay is specifically quantified by Theta. |
| In-The-Money | A term used to describe an option with intrinsic value. For standard options, a call option is in-the-money if the stock price is above the strike price. A put option is in-the-money if the stock price is below the strike price. |
| Intrinsic Value | The in-the-money portion of an option's premium. |
| Leverage | A term describing the greater percentage of profit or loss potential when a given amount of money controls a security with a much larger face value. For example, a call option enables the owner to assume the upside potential of 100 shares of stock by investing a much smaller amount than that required to buy the stock. If the stock increases by 10%, for example, the option might double in value. Conversely, a 10% stock price decline might result in the total loss of the purchase price of the option. |
| Out-of-the-Money | A term used to describe an option that has no intrinsic value. The option’s premium consists entirely of time value. For standard contracts, a call option is out-of-the-money if the stock price is below its strike price. A put option is out-of-the-money if the stock price is above its strike price. |
| Strike Price | The price at which the owner of an option can purchase (call) or sell (put) the underlying stock. Used interchangeably with striking price or exercise price. |
| Extrinsic Value | The part of an option's total price that exceeds its intrinsic value. The premium of an out-of-the-money option consists entirely of time value. Aka Time Value |
| Option Chain | An option chain is a matrix listing for a single underlying asset listing all puts, calls, strike prices, and pricing information for a given maturity period. The majority of online brokers and stock trading platforms display option quotes in the form of an option chain using real-time or delayed data. |
| Moneyness | the relative position of the current price (or future price) of an underlying asset (e.g., a stock) with respect to the strike price of a derivative, most commonly a call option or a put option. |
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