Options Glossary

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Seasonal Market

A market with a consistent but short-lived rise or drop in market activity due to predictable changes in climate or calendar.

Seat

The traditional term for membership in a stock exchange.

Securities and Commodities Exchanges

Organized exchanges where securities, options and futures contracts are traded.

Securities and Exchange Commission (SEC)

Commission created by Congress to regulate the securities markets and protect investors.

Security

A trading instrument such as stocks, bonds, and short-term investments.

Selling Short

The practice of could borrowing a stock, future or option from a broker and selling it because the investor forecasts that the price of a stock is going down.

Series (Options)

All option contracts of the same class that also have the same unit of trade, expiration date, and exercise price. Shares Certificates representing ownership of stock in a corporation or company.

Short

The selling of a security, contract or commodity not owned by the seller.

Short Premium

Expectation that a move of the underlying in either direction will result in a theoretical decrease of the value of an option.

Short Selling

The sale of shares or futures that a seller does not currently own. The seller borrows them (usually from a broker) and sells them with the intent to replace what s/he has sold through later repurchase in the market at a lower price.

Small-cap Stocks

Up-and-comer companies that offer big rewards and higher risks. They tend to cost less than mid-caps and have lower liquidity. However, small amounts of media coverage can prompt big gains.

Smoothing

A mathematical technique that removes excess data in order to maintain a correct evaluation of the underlying trend.

Specialist

A trader on the exchange floor assigned to fill bids/orders in a specific stock out of his/her own account.

Speculator

A trader who hopes to profit from a directional move in the underlying instrument. The speculator has no interest in making or taking delivery.

Spike

A sharp price rise in one or two days indicating the time for an immediate sale.

Spread

The difference between the bid and the ask prices of a security. A trading strategy in which a trader offsets the purchase of one trading unit against another.

Standard & Poor's Corporation (S&P)

A company that rates stocks and corporate and municipal bonds according to risk profiles and that produces and tracks the S&P indexes.

Stochastic Indicator

Based on the observation that as prices increase, closing prices tend to accumulate ever closer to the highs for the period.

Stock

A share of a company's stock translates into ownership of part the company.

Stock Exchange or Stock Market

An organized marketplace where buyers and sellers are brought together to buy and sell stocks.

Stock Split

An increase in the number of a stock's shares that results in decreasing the par value of its stock.

Stops

Buy stops are orders that are placed at a specified price over the current price of the market. Sell stops are orders that are placed with a specified price below the current price.

Straddle

A position consisting of a long (short) call and a long (short) put, where both options have the same strike price and expiration date.

Strangle

A position consisting of a long (short) call and a long (short) put where both options have the same underlying, the same expiration date, but different strike prices. Most strangles involve OTM options.

Strike Price (Exercise Price)

A price at which the stock or commodity underlying a call or put option can be purchased (call) or sold (put) over the specified period.

Support

A historical price level at which falling prices have stopped falling and either moved sideways or reversed direction.

Swings

The measurement of price movement between extreme highs and lows.

Synthetic Long Call

A long put and a long stock or future.

Synthetic Long Put

A long call and a short stock or future.

Synthetic Long Stock

A short put and a long call.

Synthetic Short Call

A short put and a short stock or future.

Synthetic Short Put

A short call and a long stock or future.

Synthetic Short Stock

A short call and a long put.

Synthetic Straddle

Futures and options combined to create a delta neutral trade.

Synthetic Underlying

A long (short) call together with a short (long) put. Both options have the same underlying, the same strike price and the same expiration date.