Options Glossary

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Ratio Backspread

A delta neutral spread where an uneven amount of contracts are bought and sold with a ratio less than 2 to 3. Optimally no net credit or net debit occurs.

Ratio Call Spread

A bearish or stable strategy in which a trader buys 2 higher strike calls and sell1 lower strike call. This strategy offers limited risk and unlimited profit potential.

Ratio Put Spread

A bullish or stable strategy ion which a trader buys 1 higher strike put and sells two lower strike puts. This strategy offers limited risk and unlimited profit potential.

Real-time

Data received from a quote service as the prices change.

Relative Strength

A stock's price movement over the past year as compared to a market index.

Relative Strength Index (RSI)

An indicator used to identify price tops and bottoms.

Resistance

A price level the market has a hard time breaking through to the upside.

Return

The income profit made on an investment.

Reversal Stop

A stop that, when hit, is a signal to reverse the current trading position, i.e., from long to short. Also known as stop and reverse.

Reward-Risk Ratio

The mathematical relationship between the maximum potential risk and maximum potential reward of a trade.

Rich

Priced higher than expected.

Risk

The potential financial loss inherent in the investment.

Risk Graph

A graphic representation of risk and reward on a given trade as prices change.

Risk Manager

A person who manages risk of trades in a portfolio by hedging their trades.

Risk Profile

A graphic determination of risk on a trade. This would include the profit and loss of a trade at any given point for any given time frame.

Round-turn

Procedure by which a long or short position is offset by an opposite transaction.

Running Stops

Something which when quoted, floor traders use to move the market. When stops are bunched together, traders may move the market in order to activate stop orders and propel the market further.