| A | B |
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| A strike price | (1) is the price at which a derivative contract can be bought/sold when it is exercised (2) is established when a contract is first written (3) tells the investor what price the underlying asset must reach before the option is in-the-money (ITM) (4) are standardized, meaning they are at fixed dollar amounts, such as $31, $32, $33, $102.50, $105, and so on |
| For call options | (1) the strike price is where the security can be bought by the option holder |
| For put options | (1) the strike price is the price at which the security can be sold |
| Strike price | (1) is also known as the exercise price (2) is the price at which a derivative contract can be bought or sold (exercised) (3) also known as the exercise price, is the most important determinant of option value |
| Derivatives | (1) are financial products whose value is based (derived) on the underlying asset, usually another financial instrument (2) value is determined by fluctuations in the underlying asset |
| out of the money | (1) at expiration of the call option, when the stock's current underlying price is trading lower than the strike price (2) for example: CALL OPTION: STRIKE PRICE: $150; CURRENT UNDERLYING PRICE: $145 (3) This contract is out of the money by $5 |
| At expiration of the call option | (1) if the stock current price is trading higher than the strike price then it is in the money by the difference between the strike(set price) price and the current price of the underlying stock (2) CALL OPTION: CURRENT STRIKE PRICE: $100 UNDERLYING CURRENT PRICE: $145 (3) this contract is in-the-money by $45 |
| The price difference | (1) between the underlying stock price and the strike price determines an option's value |
| For buyers of a call option | (1) if the strike price is above the underlying stock price, the option is out of the money (OTM) |
| In-the-money | (1) when the underlying stock current price is above the strike price, the option has intrinsic value |
| Strike Price | (1) and exercise price are synonymous |
| The most common underlying assets for derivatives | (1) are stocks, bonds, commodities, currencies, interest rates, and market indexes (2) these assets are commonly purchased through brokerages |
| Over-The-Counter(OTC)-traded derivatives | (1) generally have a greater possibility of counterparty risk |
| Counterparty Investing | (1) risk is the danger that one of the parties involved in the transaction might default (2) these parties trade between two private parties and are unregulated |
| Exchange Trades Derivatives | (1) are standardized and more heavily regulated |
| The Exercise Price | (1) is the price at which an underlying security can be purchased or sold when trading a call or put option, respectively |
| The Market Price | (1) is the current price at which an asset or service can be bought or sold |
| Bids | (1) are represented by buyers (2) is the higher price someone is advertising they will buy at |
| Offers | (2) are represented by sellers (2) is the lowest price someone is advertising they will sell at |
| The Clean Price | (1) the market price in the bond market is the last reported price excluding accrued interest |
| Buy Open | (1) refers to when you begin the trade the first time you get in, you buy open and when you finish the trade you sell close |
| Sell Open | (1) means you are starting a new trade (2) is like shorting a stock |
| When you begin the trade | (1) you always select buy open or sell open (2) always select open when getting into a trade |
| WHEN YOU ARE READY TO TAKE YOUR MONEY | (1) chose close, whether it's buy or sell (2) always do the opposite of what you started with (3) so if you buy to open chose sell to close |
| WHEN YOU ARE PICKING AN EXPIRATION DATE | (1) don't choose the ones with a "w" the reason is because the "w" are harder to fill (2) the weekly options are more rare and are harder to come by (3) spread on the weekly is wider |
| THE FURTHER AWAY THE EXPIRATION DATE IS | (1) THE MORE EXPENSIVE IT WILL BE |
| The closer the expiration date | (1) the less value the option will have per day (2) when in doubt, go with the closest non "w" date |
| With stock options | (1) you are not holding the stock, you do not own the stock, you don't have the stock certificate (2) you are mimicking holding the stock (3) you are holding a facsimile |
| Bid is the price | (1) the non-owner wants to buy the stock option for |
| Ask is what a stock owner | (1) wants to sell the stock option for |
| If the spread between the bid and the ask is wide | (1) that means the volume is low (2) a small spread, that means a lot of people are vying for it |
| Short Selling | (1) is where an investor sells shares of stock that they don't own with the intent to buy them back later at a lower price |
| Unlimited Amount Of Loss | (1) when your short sale goes the opposite direction and leave you in debt. |
| When you begin the trade you select | (1) buy open or (2) sell open |
| When you finish the trade you | (1) buy close or (2) sell close |
| Yes, you can sell a call option | (1) at the very beginning without having a call option (2) it's just like shorting a stock, you don't have to own it to short it (3) you don't need to own an option to sell an option |
| Buy Open | (1) sell close |
| The Closer The Expiration Date, the closer it is to us | (1) the less value the stock option will have per day |
| When you hold onto a stock option | (1) you're losing money everyday because it's getting closer to that expiration date (2) so you want an expiration date that's further out, but those are more expensive |
| The Protective Put | (1) is an option strategy that helps protect against a decline in a stock's price but doesn't limit upside potential if the stock price were to go higher |
| To write a covered call option | (1) pick a stock you already own & for which there is an options market (2) decide how many calls you would like to write (writing means selling) (3) each call gives the owner the right to buy 100 shares of that stock, so if you own 200 shares of Coca-Cola (KO), you can write two calls |
| How A Protective Put Works | (1) you own shares of a stock, that you don't necessarily want to sell (2) you buy a put option, giving you the right to sell the stock at a lower price for a certain period of time (3) you choose a put that is below the current stock price but where you would be willing to sell the stock if the price were to decline without too much loss |
| A Call Option | (1) is a contract that gives the holder (buyer) the right, but not the obligation, to buy a security at a specified price for a certain period of time. |
| Call Buyers | (1) have rights |
| Calls Sellers | (1) have obligations (2) when you sell a call you are obligated to sell shares of a stock at the strike price on or before the expiration date |
| Tick Index | (1) compares the number of stocks that are rising to the number of stocks that are falling on the New York Stock Exchange (NYSE) (2) measures stocks making an uptick and subtracts stocks making a downtick |
| Tick Size or Tick Value | — varies according to the asset being traded |
| Size & Value | (1) tick size is the minimal movement up or down on the prize (2) tick value is the real monetary value of a tick |
| Supply Zone | (1) is a price level where current holders of a market are located and are willing sellers when price reaches that area |
| A demand zone | (1) is a price level where traders and investors on the sidelines are willing to step in and buy when prices get that low |
| Support | (1) is a price level at which a financial instrument (stock, bond, currency, futures contract, etc.) will likely stop falling |
| Resistance | is a level at which the price will likely stop rising. |
| Liquidity | (1) describes the degree to which an asset or security can be easily/quickly bought or sold in the market without affecting the asset's price (2) It basically describes how quickly something can be converted to cash |
