Copyright © 2004-2008 Delta Interval, Inc.(www.deltainterval.com), All Rights Reserved. Legal Notice.
Need to Know Options Terms
- Call Option
- A contract that gives the holder the right to buy the underlying for the strike price any time until expiry.
Put Option- A contract that gives the holder the right to sell the underlying for the strike price any time until expiry.
Strike Price (Exercise Price)- The price that the underlying asset will be bought or sold at if an option contract is exercised.
Premium- A premium is the price that is paid for an option contract.
Underlying- The underlying is something which an option contract is based on. This could be a stock, index, foreign currency, interest rate, or a futures contract. The underlying is commonly referred to as the: underlying interest, underlying asset, underlying security, or the underlying stock.
Writer- A writer is someone who sold an option contract to open a position. The writer is the person who is taking on the risk, (underwriting the risk). Someone who sells an options contract they already own is not a writer, they are just closing an existing position. An option writer is said to be "short" the option they wrote.
Holder- The holder is the person who bought an option contract. Someone who buys an option they previously wrote is not a holder, they are just closing an existing position. An option holder is said to be "long" the option they bought.
Long- If you own a security you are said to be long that security.
Short- If you sell a security that you didn't already own you are said to be short that security.
Copyright © 2004-2008 Delta Interval, Inc.(www.deltainterval.com), All Rights Reserved. Legal Notice.