Options Glossary

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CAC 40 Index

A broad-based index of 40 common stocks on the Paris Bourse.

Calendar Spread

A spread consisting of one long and one short option of the same type with the same exercise price, but which expire in different months.

Call Option

An option contract which gives the holder the right, but not the obligation, to buy a specified amount of an underlying security at a specified price within a specified time in exchange for a paying a premium.

Call Premium

The amount a call option costs.

Capital

The amount of money an individual or business has available.

Capital Gain

The profit realized when a capital asset is sold for a higher price than the purchase price.

Capitalization

Refers to the current value of a corporation's outstanding shares in dollars.

Capital Loss

The loss incurred when a capital asset is sold for a lower price than the purchase price.

Capped-style Option

An option with an established profit cap or cap price.

Cash Account

An account in which the customer is required to pay in full for all purchased securities.

Cash Dividend

A dividend paid in cash to a shareholder out of a corporation's profits.

Change

The difference between the current price and the price of the previous day of a security.

Chicago Board of Trade (CBOT)

Established in 1886, the CBOT is the oldest commodity exchange in the United States and primarily lists grains, T-Bonds and notes, metals and indexes.

Chicago Board Options Exchange (CBOE)

The largest options exchange in the United States.

Class of Options

Option contracts of the same type (call or put), style and underlying security.

Clearinghouse

An institution established separately from the exchanges to ensure timely payment and delivery of securities.

Close

The price of the last transaction for a particular security each day.

Closing Purchase

A transaction to eliminate a short position.

Closing Range

The high and low prices recorded during the period designated as the official close.

Closing Sale

A transaction to eliminate a long position.

Commission

A service charge assessed by a broker and his/her investment company in return for arranging the purchase or sale of a security.

Commodity

Any bulk good traded on an exchange (for example, metals, grains and meats).

Commodity Futures Trading Commission (CFTC)

The CFTC was created by the Commodity Futures Trading Commission Act of 1974 to ensure the open and efficient operation of the futures markets.

Condor

The sale or purchase of 2 options with consecutive exercise prices, together with the sale or purchase of 1 option with an immediately lower exercise price and 1 option with an immediately higher exercise price.

Consumer Price Index (CPI)

A measure of price changes in consumer goods and services. This index is used to identify periods of economic inflation or deflation.

Contract

A unit of trading for a financial or commodity future, or option.

Correction

A sudden decline in the price of a security after a period of market strength.

Covered Call

A short call option position against a long position in an underlying stock or futures.

Covered Put

A short put option position against a short position in an underlying stock or futures.

Credit Spread

The difference in value between 2 options, where the value of the short position exceeds the value of the long position.

Cross Rate

The current exchange rate between differing currencies.