DAY TRADING GLOSSARY
Here is a glossary of 100 common day trading terms:
Ask Price – The price at which a security or asset can be bought.
Bid Price – The price a buyer is willing to pay for a security or asset.
Spread – The difference between the ask and bid price.
Volatility – Fluctuations in the price of a security or asset.
Day Trading – Buying and selling financial instruments within the same trading day.
Swing Trading – Holding trades for days to weeks to profit from price swings.
Scalping – A day trading strategy involving small price movements for quick profits.
Profit Taking – Selling an asset to lock in profits from favorable price movements.
Stop Loss Order – Automatically selling if the price drops below a specified level.
Margin – The minimum deposits required to trade on margin.
Leverage – Using borrowed funds from a broker to increase buying power.
Going Long – Buying an asset with the expectation prices will rise.
Going Short – Selling an asset with plans to repurchase after price drops.
Bullish – Expecting prices to move higher.
Bearish – Expecting prices to move lower.
Resistance – Price level preventing an asset from moving higher.
Support – Price level that prevents an asset from moving lower.
Breakout – When price moves above a resistance or support level.
Retracement – Price movement in the opposite direction of the trend.
Moving Average – Mathematical calculation to analyze price trends.
MACD – Momentum indicator showing a relationship between two moving averages.
RSI – Momentum oscillator indicating overbought or oversold conditions.
ATR – Average True Range indicator measuring volatility.
Bollinger Bands – Volatility bands indicating support and resistance levels.
VWAP – Volume Weighted Average Price indicator.
Day Trader – Someone who executes intraday trades for profits.
Position Trader – Holds trades for weeks to months to capture larger moves.
Drawdown – The decline from peak to trough of a trader’s equity curve.
Mental Stop – Unwritten predetermined exit point in the trader’s mind.
Pullback – Reversal in price after a period of increase.
Gap Up – Stock opening significantly above the previous close.
Gap Down – Stock opening significantly below the previous close.
Halting – Temporarily stopping trading of a security for news pending.
Circuit Breaker – Halts trading when prices rise or fall too quickly.
Momentum – Rate of acceleration in stock or market prices.
Reversal – Change in price direction counter to the prevailing trend.
Arbitrage – Simultaneously buying and selling for risk-free profit.
Short Squeeze – Surging prices as short sellers exit positions en masse.
VWAP Trading – Strategy aiming to buy below and sell above VWAP.
ECN Broker – Electronic Communication Network broker for direct market access.
Level II Quotes – Real-time view of bid and ask prices across order books.
Extended Hours – Trading outside of regular market session times.
Shorting Against the Box – Shorting while owning the underlying asset.
Dark Pools – Private exchanges for anonymous block trading.
Pre-Market – Trading session before the regular market opens.
After-Hours – Trading after the closing bell through after-market close.
Day Trading Margin – Minimum equity required to day trade on margin.
Pattern Day Trader – Traders making over 3-day trades in 5 business days.
Wash Sale Rule – Disallows tax loss benefits from securities sold at a loss and rebought within 30 days.
Beta – Metric indicating volatility of a stock compared to the overall market.
Alpha – Excess returns of an investment against its performance benchmark.
Sharpe Ratio – Metric measuring risk-adjusted return.
SORTINO RATIO – return/downside deviation
MAXIMUM DRAWDOWN – Worst peak-to-trough decline
WIN RATE – % of profitable trades
PAYOUT RATIO – Avg profit/avg loss
EXPECTANCY – Avg win% x avg win – avg loss% x avg loss
POSITION SIZING – Strategic determination of optimal trade size
RISK MANAGEMENT – Mitigating and limiting potential losses
PORTFOLIO MARGIN – Leverage based on total account value across all positions
BUY AND HOLD – Passive investing approach based on long-term positions
DOLLAR COST AVERAGING – Investing fixed dollar amounts at regular intervals
ASSET ALLOCATION – Strategy for portfolio diversification across asset classes
INDEX FUNDS – Passive funds tracking market indices
ETFs – Exchange-traded funds that trade intraday like stocks
SECTORS – Broad categories of the economy and financial markets
BLUE CHIPS – Stocks of large established reputable companies
FUNDAMENTAL ANALYSIS – Evaluating assets based on underlying economic factors
1. Ask price: The lowest price at which someone is willing to sell a security.
2. Average true range (ATR): A technical analysis indicator that measures volatility.
3. Bear market: A market where prices are falling or expected to fall.
4. Bid price: The highest price at which someone is willing to buy a security.
5. Blue chip stock: A well-established company with a long history of stable earnings and a good reputation.
6. Bull market: A market where prices are rising or expected to rise.
7. Candlestick chart: A chart that displays the open, high, low, and close prices of a security in a visually appealing way.
8. Closing price: The price of a security at the end of a trading day.
9. Commission: The fee charged by a broker for executing a trade.
10. Day trading: The practice of buying and selling securities within the same trading day.
11. Dead cat bounce: A temporary recovery in the price of a security after a significant decline.
12. Dip: A drop in the price of a security.
13. Dividend: A payment made by a company to its shareholders.
14. Double top: A technical analysis pattern that indicates a potential trend reversal.
15. Exchange: A marketplace where securities are bought and sold.
16. Execution: The process of completing a trade.
17. Fibonacci retracement: A technical analysis tool that uses horizontal lines to indicate areas of support or resistance.
18. Fill or kill: An order that must be executed immediately or canceled.
19. Fundamental analysis: An approach to analyzing securities based on economic, financial, and other qualitative and quantitative factors.
20. Gap: A sudden change in the price of a security between two trading sessions.
21. Head and shoulders: A technical analysis pattern that indicates a potential trend reversal.
22. High-frequency trading (HFT): A type of trading that uses algorithms to execute trades at high speeds.
23. Initial public offering (IPO): The first sale of a company’s shares to the public.
24. Intraday: Within a single trading day.
25. Limit order: An order to buy or sell a security at a specified price or better.
26. Liquidity: The ease with which a security can be bought or sold.
27. Long: A position in which a trader buys a security with the expectation that its price will rise.
28. Market capitalization (market cap): The total value of a company’s outstanding shares.
29. Market order: An order to buy or sell a security at the best available price.
30. Moving average: A technical analysis indicator that smooths out price fluctuations.
31. Narrow range day: A trading day where the range between the high and low prices of a security is narrow.
32. Offer- The price at which someone is willing to sell a security.
33. Opti-on: A contract that gives the holder the right to buy or sell a security at a specified price.
34. Oscillator: A technical analysis tool that measures the momentum or speed of price movements.
35. Overbought: A condition where security is thought to have risen too far too fast and is due for a correction.
36. Oversold: A condition where security is thought to have fallen too far too fast and is due for a bounce.
37. Penny stock: A low-priced stock that trades outside of the major exchanges.
38. Pips: The smallest unit of price movement in a currency pair.
39. Pivot Point: A technical analysis tool that uses previous price levels to identify potential support or resistance levels.
40. Position: The amount of security a trader holds.
41. Price action: The movement of a security’s price over time.
42. Profit and loss (P&L): The amount of money gained or lost on a trade.
43. Pullback: A temporary decline in the price of a security after a significant rise.
44. Resistance: A price level where selling pressure is thought to be strong enough to prevent further price increases.
45. Risk management: The practice of minimizing the potential losses from trading.
46. Scalping: A trading strategy that aims to make small profits from frequent trades.
47. Sector: A group of companies that operate in the same industry.
48. Short: A position in which a trader sells a security with the expectation that its price will fall.
49. Short selling: The practice of selling a security that the trader does not own with the expectation of buying it back at a lower price.
50. Spread: The difference between the bid and ask prices of a security.
51. Stock split: A corporate action where a company increases the number of its outstanding shares.
52. Stop loss: An order to sell a security if its price falls to a specified level.
53. Support: A price level where buying pressure is thought to be strong enough to prevent further price decreases.
54. Swing trading: A trading strategy that aims to capture short-term price movements, usually over a few days to a few weeks.
55. Technical analysis: An approach to analyzing securities based on price and volume data and chart patterns.
56. Three black crows: A technical analysis pattern that indicates a potential trend reversal.
57. Tick: The smallest possible price movement of a security.
58. Time and sales: A record of all trades executed on an exchange, including the time, price, and volume of each trade.
59. Trading plan: A written set of rules and guidelines that a trader follows to make trading decisions.
60. Trend: The general direction in which the price of a security is moving.
61. Trend line: A line drawn on a chart that connects two or more price points and indicates the direction of a trend.
62. Triple bottom: A technical analysis pattern that indicates a potential trend reversal.
63. Volatility: The degree of variation in the price of a security over time.
64. Volume: The total number of shares or contracts traded in a security over a given period of time.
65. Whipsaw: A situation where a security’s price moves in one direction and then quickly reverses course.
66. 52-week high: The highest price at which a security has traded over the past 52 weeks.
67. 52-week low: The lowest price at which a security has traded over the past 52 weeks.
68. Arbitrage: The practice of buying and selling security simultaneously in different markets to profit from price differences.
69. Average directional index (ADX): A technical analysis indicator that measures the strength of a trend.
70. Backtesting: The process of testing a trading strategy on historical data to see how it would have performed in the past.
71. Bar chart: A chart that displays the open, high, low, and close prices of security as bars.
72. Breakout: A price movement that breaks through a significant level of support or resistance.
73. Bollinger Bands: A technical analysis tool that uses standard deviations to indicate the potential price levels of security.
74. Buy and hold: A long-term investment strategy where a trader buys a security and holds it for an extended period of time.
75. Candlestick pattern: A pattern formed by the open, high, low, and close prices of a security on a candlestick chart.
76. Dark pool: A private exchange where large institutional investors can buy and sell securities without affecting the public market.
77. Day High: The highest price at which a security has traded during a trading day.
78. Day low: The lowest price at which a security has traded during a trading day.
79. Dead cross: A technical analysis pattern that indicates a potential trend reversal.
80. Derivative: A financial instrument whose value is derived from the value of an underlying asset.
81. Dollar cost averaging: A long-term investment strategy where a trader invests a fixed amount of money at regular intervals.
82. Dow Jones Industrial Average (DJIA): A stock market index that tracks the performance of 30 large-cap U.S. companies.
83. Economic indicator: A statistic that provides information about the health of an economy.
84. Earnings per share (EPS): The portion of a company’s profit allocated to each outstanding share of its common stock.
85. Elliot wave theory: A technical analysis theory that suggests that market prices move in predictable waves.
86. Fibonacci sequence: A sequence of numbers where each number is the sum of the two preceding numbers.
87. Fill- The execution of a trade.
88. Float: The total number of shares of a company that are available for trading.
89. Forward testing: The process of testing a trading strategy on real-time data to see how it performs in the present.
90. Fundamentalist: A trader who uses fundamental analysis to make trading decisions.
91. Golden cross: A technical analysis pattern that indicates a potential trend reversal.
92. Gross domestic product (GDP): The total value of all goods and services produced in a country over a given period of time.
93. Head fake: A fake-out move that tricks traders into taking the wrong position.
94. High-frequency data: Data that is collected and processed at high speeds.
95. Inverted yield curve: A condition where short-term interest rates are higher than long-term interest rates.
96. Leveraged buyout (LBO): The acquisition of a company using a significant amount of borrowed money.
97. Liquidity provider: A market participant that offers to buy or sell a security at a specified price.
98. Margin: The amount of money a trader must deposit with a broker to open a position.
99. Market cycle: The pattern of ups and downs in the overall market over time.
100. Moving average convergence divergence (MACD): A technical analysis indicator that shows the relationship between two moving averages.
Ask Price – The lowest price a seller is willing to accept for a security.
Bid Price – The highest price a buyer is willing to pay for a security.
Bullish Trend – An upward trending market over a period of time.
Bearish Trend – A downward trending market over a period of time.
Breakout – When the price moves outside of a defined support or resistance level.
Support Level – A price level where buying interest is strong enough to stop the decline.
Resistance Level – A price level where selling interest is strong enough to stop the advance.
Retracement – A reversal in price movement against the prevailing trend.
Volume – The number of shares or contracts traded during a specified time.
Realized Profit/Loss – The actual profit or loss when closing out a position.
Unrealized Profit/Loss – Paper profit or loss on open positions.
Limit Order – Order to buy or sell at a specified price or better.
Market Order – Order to immediately buy or sell at current market prices.
Stop Order – Order to trigger a market order when the price hits a predefined level.
Trailing Stop – Stop order that adjusts to lock in profits as the price moves.
Day Trading – Opening and closing positions within the same trading day.
Swing Trading – Holding positions for days to weeks to profit from price swings.
Scalping – A trading strategy focused on small gains in short periods.
Short Selling – Selling borrowed securities first, then buying back later.
Margin – Cash or securities deposited to maintain leveraged positions.
Leverage – Trading larger amounts by borrowing money from the broker.
Commission – Fees paid to brokers for facilitating trades.
Slippage – Difference between the expected and actual fill price of an order.
Spread – The difference between the bid and ask price.
Gap Up – Asset opens higher than the previous close.
Gap Down – Asset opens lower than the previous close.
Bollinger Bands – Volatility bands indicating support and resistance.
Moving Average – Mathematical calculation to analyze price trends.
MACD – Momentum indicator showing the relationship between two moving averages.
RSI – Momentum oscillator indicating overbought or oversold levels.
ATR – Average True Range indicator for measuring volatility.
VWAP – Volume Weighted Average Price indicator.
Pullback – A dip in price after a period of increase.
Reversal – Change in price direction counter to the prevailing trend.
Profit Taking – Selling positions to lock in profits from favorable moves.
Consolidation – Price action characterized by horizontal movement and narrow range.
Break Even – Reaching a position of zero profit/loss by offsetting costs.
Drawdown – Decline from peak to trough in the value of an investment.
Risk/Reward – Ratio comparing the potential profit of a trade to potential loss.
Hedging – Using opposing positions to mitigate risk exposure.
Arbitrage – Simultaneously buying and selling for risk-free profit.
Short Squeeze – Surging prices as short sellers close out positions.
Circuit Breaker – Halts trading when prices rise or fall too quickly.
Day Trading Margin – Minimum equity required to trade on intraday margin.
Buying Power – Total equity and margin available for opening new positions.
VWAP Trading – Aiming to buy below and sell above the VWAP indicator.
Dark Pools – Private exchanges for anonymous block trading between institutions.
Pre-Market Trading – Trading session before the regular market opens.
After-Hours Trading – Session after market close through after-market ending.
Overnight Risk – Exposure of a position held after market close.
Peak-to-Trough – The full range from a relatively high point to a low point.
Dead Cat Bounce – Short-lived recovery after a substantial decline.
Momentum Trading – Strategy based on buying assets demonstrating upward price momentum.
Mean Reversion – The theory that asset prices tend to move back towards the mean or average.
Beta – Measure of an asset’s volatility in relation to the overall market.
Alpha – Excess returns compared to a benchmark index.
Sharpe Ratio – Metric for calculating risk-adjusted return.
Broker – Licensed firm that facilitates customer trades.
Pattern Day Trader – Traders making 4+ day trades in 5 business days.
Uptick Rule – Regulation for short selling on an uptick.
Wash Sale Rule – Disallows tax loss benefits from securities sold at a loss and rebought within 30 days.
Prospectus – Legal document filed by investment companies offering securities.
Due Diligence – Process of vetting an investment opportunity.
Whipsaw – Frequent trading losses from choppy price action.
Stock Split – Increasing the number of outstanding shares to lower the price.
Secondary Offering – Issuance of new stock from a company after the IPO.
Margin Call – Brokerage demands to deposit funds to meet minimum margin requirements.
Pump and Dump – Fraudulently inflating prices through hype to sell shares.
Growth Stock – The company is expected to have above-average growth compared to the market.
Income Stock – Mature company paying higher than average dividends.
Defensive Stock – A company whose business is stable regardless of economic cycles.
Cyclical Stock – A company whose performance follows economic cycles and conditions.
Blue Chip Stock – Stock of large reputable companies with long histories.
Penny Stock – Low-priced shares of small companies with higher volatility.
Earnings Per Share – Net income divided by the number of outstanding shares.
Price/Earnings Ratio – Stock price divided by earnings per share.
Return on Equity – Net income divided by shareholders’ equity.
Return on Assets – Net income divided by total assets.
Debt/Equity Ratio – Total liabilities divided by shareholders’ equity.
OPTIONS
Option – Contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a preset price on or before a specified date.
Call Option – Contract giving the buyer the right to buy the underlying asset.
Put Option – Contract giving the buyer the right to sell the underlying asset.
Underlying Asset – The security or asset on which an options contract is based.
Strike Price – The price at which the underlying can be bought or sold as per the options contract.
Expiration Date – The last date the options contract is valid.
Premium – The price paid by the options buyer to the seller for the options contract.
In the Money – When the strike price is below the market price for calls, or above the market price for puts.
Out of the Money – When the strike price is above the market price for calls, or below the market price for puts.
At the Money – When the strike price equals the current market price of the underlying.
Intrinsic Value – The difference between the strike price and the current market price of the underlying asset.
Time Value – The value of the options contract above the intrinsic value due to remaining time until expiration.
Volatility – A measure of the size and frequency of price fluctuations.
Implied Volatility – Volatility level derived from the price of an option.
Vega – The amount an option’s price changes given a 1% change in implied volatility.
Theta – The amount an option’s price decreases as expiration approaches.
Delta – The amount an option’s price changes given a $1 change in the underlying asset’s price.
Gamma – The rate of change for delta given a $1 change in the underlying.
Rho – The amount an option’s price changes given a 1% change in interest rates.
Contract Size – The amount of the underlying asset represented by each options contract.
Open Interest – The number of outstanding contracts in the market.
Volume – The number of options contracts traded during a period.
Bid-Ask Spread – The difference between the bid and ask prices for an option.
Exercise – Using the right granted by the option to buy or sell the underlying.
Assignment – Being required to buy or sell the underlying when an option is exercised.
Exercise Style – American-style options can be exercised anytime before expiration while European options can only be exercised on the expiration date.
LEAPS – Long-term equity anticipated securities – options with expiration dates over 1 year in the future.
Market Order – An order to immediately buy or sell an option at the current market price.
Limit Order – An order to buy or sell an option at a specified price or better.
Ask Price – The lowest price a seller will accept for an options contract.
Bid Price – The highest price a buyer is willing to pay for an options contract.
Intrinsic Value – The difference between the strike price and the current market price of the underlying asset.
Time Decay – The decline in the value of an option as it approaches expiry.
Naked Option – Writing an option without owning the underlying or offsetting options.
Covered Call – Writing call options while owning the equivalent number of shares of the underlying stock.
Married Put – Buying a put to protect a long stock position.
Bull Call Spread – Combination strategy of buying in-the-money calls and selling higher strike out-of-the-money calls.
Bear Put Spread – Combination strategy of buying in-the-money puts and selling lower strike out-of-the-money puts.
Iron Condor – Combination strategy using both a bull put spread and a bear call spread.
Straddle – Combination strategy of buying both a put and call with the same strike price and expiration.
Strangle – Combination strategy of buying an out-of-the-money put and call on the same underlying.
Calendar Spread – Combination strategy using options of the same underlying but different expirations.
Diagonal Spread – Combination strategy using different strike prices and expiration dates.
Butterfly Spread – Combination strategy using various strikes and expirations to create a bell-shaped risk/reward.
Pin Risk – The risk of being assigned on short options when the underlying price is trading at or near the strike price near expiration.
Early Exercise – Calling away or putting shares before expiration rather than waiting to be assigned.
Expiration Risk – Options having value due to being in the money but expiring worthless due to lack of time value.
A.M. Settlement – Adjusting options values on the morning after expiration based on the closing price of the underlying from the previous day.
Day Trading Options – Opening and closing option positions within the same trading day.
Portfolio Margin – Calculation of brokerage margin requirements based on total portfolio risk rather than individual positions.
Box Spread – Combination strategy with long and short positions in calls/puts with the same strikes to profit from differences in premiums.
Debit Spread – Strategy where the net premium paid is greater than the premium received.
Credit Spread – Strategy where premium received from writing options exceeds premium paid.
Risk Profile – Graph of potential profit/loss outcomes of an options position or strategy across underlying prices.
Break Even Point – Underlying price where an options strategy results in neither profit nor loss.
Maximum Risk – The greatest amount of loss possible for an options position or strategy.
Maximum Profit – The greatest amount of profit possible for an options position or strategy.
Greeks – Key measures that impact an option’s price – delta, gamma, theta, vega, and rho.
Implied Volatility Rank – Comparison of an underlying’s current implied volatility relative to its historical range.
Volatility Skew – Difference in implied volatility for options with higher versus lower strikes. Creates skew in options prices across strikes.
VIX – CBOE Volatility Index which tracks near-term volatility expectations based on S&P 500 option prices.
What is an option contract?
We are hoping this to be an easy and simple lesson to introduce options to you. By following Options Basics’ articles, you should be able to understand options and how to utilize options to either profit or protect your stock.
An option contract is an agreement between two parties, giving the holder the right to buy or the right to sell a fixed quantity of an underlying security at a specific price(the strike price) for a specific period of time.
There are two types of options: calls and puts. options can be traded on several kinds of underlying securities. Some of the most common ones are stocks, indexes, or ETFs (Exchange Traded Funds). For stock options, a single contract always covers 100 shares of the underlying stock.
So how can we understand an option contract? An option contract mainly consists of 5 factors: the underlying stock, option type, expiration date, strike price, and option price(Option premium).
OPTIONS TRADING
1. Option: An agreement that gives the buyer the right, but not the obligation, to buy or sell a security at a specific price on or before a certain date.
2. Call Option: An option contract that gives the buyer the right to buy the underlying asset at a specific price.
3. Put Option: An option contract that gives the buyer the right to sell the underlying asset at a specific price.
4. Strike Price: The price at which the underlying asset can be bought or sold through an options contract.
5. Expiration Date: The date on which an options contract expires.
6. In-the-Money: An option that has intrinsic value, meaning it would be profitable to exercise the option immediately.
7. Out-of-the-Money: An option that has no intrinsic value, meaning it would be unprofitable to exercise the option immediately.
8. At-the-Money: An option that has a strike price equal to the current market price of the underlying asset.
9. Premium: The price paid for an options contract.
10. Bid Price: The highest price a buyer is willing to pay for an options contract.
11. Ask Price: The lowest price a seller is willing to accept for an options contract.
12. Spread: The difference between the bid and ask price of an options contract.
13. Open Interest: The total number of outstanding options contracts for a specific strike price and expiration date.
14. Implied Volatility: The expected volatility of the underlying asset, as implied by the price of the options contracts.
15. Delta: The change in the price of an option for every $1 change in the price of the underlying asset.
16. Gamma: The rate of change in an option’s delta for every $1 change in the price of the underlying asset.
17. Theta: The rate at which the value of an option decreases over time due to the passage of time.
18. Vega: The rate at which the value of an option changes in response to changes in implied volatility.
19. Intrinsic Value: The amount of profit that could be realized by immediately exercising an option.
20. Time Value: The portion of the premium that is not attributable to intrinsic value.
21. American Option: An option that can be exercised at any time prior to its expiration date.
22. European Option: An option that can only be exercised on its expiration date.
23. Exotic Option: An option with non-standard features, such as a barrier option or a binary option.
24. Barrier Option: An option that only becomes active if the underlying asset reaches a certain price level.
25. Binary Option: An option that pays a fixed amount if the underlying asset reaches a certain price level.
26. Collar: An options strategy that involves buying a protective put and selling a covered call.
27. Straddle: An options strategy that involves buying a call option and a put option with the same strike price and expiration date.
28. Strangle: An options strategy that involves buying a call option and a put option with different strike prices and expiration dates.
29. Butterfly: An options strategy that involves buying a call option and a put option with the same strike price, and selling two options with a higher and lower strike price.
30. Iron Butterfly: An options strategy that combines a butterfly spread with a short straddle.
31. Calendar Spread: An options strategy that involves buying and selling options with different expiration dates.
32. Diagonal Spread: An options strategy that involves buying and selling options with different strike prices and expiration dates.
33. Covered Call: An options strategy that involves selling a call option against a long position in the underlying asset.
34. Protective Put: An options strategy that involves buying a put option to protect against a decline in the value of a long position in the underlying asset.
35. Iron Condor: An options strategy that combines a bull spread and a bear spread.
36. Credit Spread: An options strategy that involves selling an option with a higher premium and buying an option with a lower premium.
37. Debit Spread: An options strategy that involves buying an option with a higher premium and selling an option with a lower premium.
38. Synthetic Long: An options strategy that involves buying a call option and selling a put option with the same strike price and expiration date.
39. Synthetic Short: An options strategy that involves selling a call option and buying a put option with the same strike price and expiration date.
40. Box Spread: An options arbitrage strategy that involves buying a bull spread and a bear spread with the same strike prices and expiration dates.
41. Covered Put: An options strategy that involves selling a put option against a short position in the underlying asset.
42. Iron Butterfly Spread: An options strategy that involves a combination of a bear call spread and a bull put spread.
43. Iron Condor Spread: An options strategy that involves a combination of a bear call spread and a bull put spread.
44. Vertical Spread: An options strategy that involves buying and selling options with different strike prices but the same expiration date.
45. Horizontal Spread: An options strategy that involves buying and selling options with the same strike price but different expiration dates.
46. Ratio Spread: An options strategy that involves buying and selling options with different strike prices and different numbers of contracts.
47. Butterfly Spread: An options strategy that involves buying and selling options with the same expiration date but different strike prices.
48. Box Spread: An options strategy that involves buying and selling options with the same strike price and expiration date, but different exercise prices.
49. Synthetic Option: An options strategy that involves combining options and the underlying asset to create a synthetic position.
50. Roll: The act of closing out an existing options position and opening a new one with a different expiration date or strike price.
51. Early Exercise: The act of exercising an option before its expiration date.
52. Assignment: The process by which an options seller is obligated to fulfill the terms of the contract.
53. Options Chain: A list of available options contracts for a particular underlying asset.
54. Volatility Smile: A graphical representation of implied volatility for options with different strike prices but the same expiration date.
55. Volatility Skew: A graphical representation of implied volatility for options with the same strike price but different expiration dates.
56. Synthetic Long Stock: An options strategy that involves buying a call option and selling a put option with the same strike price and expiration date, creating a position similar to owning the underlying stock.
57. Synthetic Short Stock: An options strategy that involves selling a call option and buying a put option with the same strike price and expiration date, creating a position similar to shorting the underlying stock.
58. Spread Order: An order to buy or sell multiple options contracts as a single transaction.
59. Limit Order: An order to buy or sell an option at a specific price or better.
60. Market Order: An order to buy or sell an option at the current market price.
61. Stop Order: An order to buy or sell an option at a specific price, triggered when the market price reaches a certain level.
62. Trailing Stop Order: An order to buy or sell an option at a specific price, triggered when the market price moves in a favorable direction.
63. Time Decay: The decrease in the value of an option over time due to the passage of time.
64. Liquidity: The ease with which an options contract can be bought or sold in the market.
65. Breakeven Point: The point at which the profit or loss from an options trade is zero.
66. Options Clearing Corporation (OCC): The organization responsible for clearing and settling options trades.
67. Options Regulatory Fee (ORF): A fee charged by the OCC for each options contract traded.
68. Options Disclosure Document (ODD): A document that provides information about the risks and features of options trading.
69. Margin Requirement: The amount of cash or securities required to be deposited in a brokerage account to trade options.
70. Naked Option: An options position in which the seller does not own the underlying asset.
71. Protective Call: An options strategy that involves buying a call option to protect against a rise in the value of a short position in the underlying asset.
72. Synthetic Covered Call: An options strategy that involves buying the underlying asset and selling a call option with the same strike price and expiration date.
73. Synthetic Covered Put: An options strategy that involves shorting the underlying asset and buying a put option with the same strike price and expiration date.
74. Cash-Secured Put: An options strategy in which the seller of a put option sets aside enough cash to buy the underlying asset in case of assignment.
75. Married Put: An options strategy that involves buying a put option to protect a long position in the underlying asset.
76. Box Spread Arbitrage: An options arbitrage strategy that involves buying and selling options in a box spread to lock in a risk-free profit.
77. Conversion Arbitrage: An options arbitrage strategy that involves buying the underlying asset, selling a call option, and buying a put option with the same strike price and expiration date to lock in a risk-free profit.
78. Reversal Arbitrage: An options arbitrage strategy that involves buying a call option, selling a put option, and shorting the underlying asset to lock in a risk-free profit.
79. Synthetic Straddle: An options strategy that involves buying a call option and selling a put option with the same strike price and expiration date to create a position similar to a long straddle.
80. Synthetic Strangle: An options strategy that involves buying a call option and selling a put option with different strike prices and the same expiration date to create a position similar to a long strangle.
81. Volatility Index (VIX): A measure of the implied volatility of the S&P 500 index, often used as a gauge of market volatility.
82. Roll Forward: The act of closing out an existing options position and opening