Trading stock options is a great way to invest. Read the terms below as well as other options trading terms.
Ratio Calendar Spread
Selling more near-term options than longer-term ones purchased, all with the same strike; either puts or calls.
Ratio Spread
Constructed with either puts or calls, the strategy consists of buying a certain amount of options and then selling a larger quantity of more out-of-the-money options.
Ratio Strategy
A strategy in which one has an unequal number of long securities and short securities. Normally, it implies a preponderance of short options over either long options or long stock.
Ratio Write
Selling of call options in a ratio higher than 1 to 1 against the stock that is owned.
Return if Exercised
The return that a covered call writer would make if the underlying stock were called away
Series
All option contracts of the same class that also have the same unit of trade, expiration date and strike price.
Settlement Price
The official price at the end of a trading session. This price is established by The Options Clearing Corporation and is used to determine changes in account equity, margin requirements, and for other purposes.
Short Position
A position wherein a person’s interest in a particular series of options is as a net writer.
Spread Order
An order to simultaneously transact two or more option trades. Typically, one option would be bought while another would simultaneously be sold. Spread orders may be limit orders, not held orders, or orders with discretion
Spread Strategy
Any option position having both long options and short options of the same type on the same underlying security
Straddle
The purchase or sale of an equal number of puts and calls having the same terms.
Strike Price
The stated price per share for which the underlying security may be purchased (in the case of a call) or sold (in the case of a put) by the option holder upon exercise of the option contract.
Synthetic Put
A strategy equivalent in risk to purchasing a put option where an investor sells stock short and buys a call.
Be sure to read more about how to trade options.
