An option strategy in which a short-term option is sold and a longer-term option is bought, both having the same striking price. Either puts or calls may be used.
All binary options are capped-style options since the value of the option or structure of options has to remain between o and 1 (for wholesale digital options markets, e.g. interbank FX) or 0 and 100 for retail.
The interest expense on a debit balance created by establishing a position.
Binary options are very much cash-based except in the case of the first leg of a (conditional) barrier option that converts into a deliverable entity, e.g. an option on a stock.
The process by which the terms of an option contract are fulfilled through the payment or receipt of the losings or winnings, respectively.
The Chicago Board Options Exchange; the first national exchange to trade listed stock options.
Class (of Options)
Option contracts of the same type (call or put) and Style (American, European) that cover the same underlying security.
A transaction in which the purchaser’s intention is to reduce or eliminate a short position in a given series of options.
A transaction in which the seller’s intention is to reduce or eliminate a long position in a given series of options
A trade that reduced an investor’s position. Closing buy transactions reduce short positions and closing sell transactions reduce long positions. See also Opening Transaction.
Any position involving both binary call options and binary put options that is not a straddle.
An order which can be executed only if another event occurs; i.e. “sell Jan 550 Calls if underlying asset is greater than 560”.
Conventional options is the term used for the kind of options that are traded at most mainstream exchanges. Whereas binary options prices are restricted to 0 – 100, conventional options have unlimited upside and downside. Also conventional options are usually exercisable into the underlying asset as opposed to binaries that are generally cash settled.
A riskless transaction in which the arbitrageur buys the same strike, same expiry put and call for less than 1. Alternatively sells the same strike, same expiry for greater than 1.
To buy back as a closing transaction an option that was initially written.
An option strategy in which a call option is written against long stock.
Covered Call Option Writing
A strategy in which one sells call options while simultaneously being long the underlying security.
Covered Put Option Writing
A strategy in which one sells put options while simultaneously being short the underlying security.
The expiration dates applicable to various classes of options.