Learn options for dummies by reading the below terms.
Neutral
Describing an opinion that is neither bearish nor bullish. Neutral option strategies are generally designed to perform best if there is little or no net change in the price of the underlying stock or index
Non-Equity Option
An option whose underlying entity is not common stock; typically refers to options on physical commodities and index options
Opening Purchase
A transaction in which the purchaser’s intention is to create or increase a long position in a given series of options.
Opening Sale
A transaction in which the seller’s intention is to create or increase a short position in a given series of options.
Opening Transaction
A trade which adds to the net position of an investor. An opening buy transaction adds more long securities to the account. An opening sell transaction adds more short securities.
Open Interest
The number of outstanding option contracts in the exchange market or in a particular class or series.
Options Clearing Corporation (OCC)
The issuer of all listed option contracts that are trading on the national option exchanges.
Out-of-the-money
A call option is out-of-the-money if the strike price is greater than the market price of the underlying security. A put option is out-of-the-money if the strike price is less than the market price of the underlying security.
Over-the-Counter Option (OTC)
An option traded off-exchange, as opposed to a listed stock option. The OTC option has a direct link between buyer and seller, has no secondary market, and has no standardization of striking prices and expiration dates
Position Limit
The maximum number of put or call contracts on the same side of the market that can be held in any one account or group of related accounts. Short puts and long calls are on the same side of the market. Short calls and long puts are on the same side of the market.
Premium
The price of an option contract, determined in the competitive marketplace, which the buyer of the option pays to the option writer for the rights conveyed by the option contract.
Put
An option contract that gives the holder the right to sell the underlying security at a specified price for a certain fixed period of time.
Learn more about options by reading the options trading terms A-B. You can also learn other stock trading terms in this blog as well. Happy investing!
