JAVIER SAAVEDRA APPEARANCE ON TV INTERECONOMIA
GLOSSARY
OPTION: A contract that gives you the right, but not the obligation to buy or sell shares of stock at a specified price at some point in the future.
CALL OPTION: A call option gives an investor/trader the right to buy a set number of share of stock at a predetermined price until the option expires at some future point in time.
PUT OPTION: A put option gives an investor the right to sell a set number of shares of stock at a predetermined price over a given period of time.
STRIKE PRICE: The strike price is the price specified in an option contract.
PREMIUM: The premium is the fee charged for an option and premium prices are usually quoted on a per share basis. Many factors affect the premium price. For example, the longer the length of time before expiration, the higher the premium will be.
INTRINSIC VALUE: An intrinsic value is a value determined by the relationship of the stock price to the strike price. For instance, on a call option, the intrinsic value is when the stock price is above the strike price. On a put option, the intrinsic value is when the stock price is below the strike price.
IN-THE-MONEY: An option is considered to be 'In the Money' when it has an intrinsic value.
OUT-OF-THE MONEY: An option is considered to be 'Out of the money' when it has no intrinsic value.
AT-THE-MONEY: An option is considered to be At-The-Money when the stock price and the strike price are the same.
VOLATILITY: This is simply indicated by the frequent fluctuation in security prices.
LEAPS: (Long Term Equity Anticipation Securities) have longer-term expiration, up to three years in the future. They allow more conservative investors to enter the options market because of long term expiration.
COMMODITY FUTURES CONTRACT: is a commitment to either receive or deliver a specific amount of a specific commodity during a specific month at a price determined by open auction on a futures exchange.
FOREIGN CURRENCY EXCHANGE: is simply the price of one country's money in terms of another country's money.
BEAR: An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices.
BULL: An investor who believes a stock or the overall market will rise.
CAPITAL GAIN: The difference between the net cost of a security and the net sale price if that security is sold at a profit.
COVERED CALL: A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. In other words, the holder owns the stock and sells/writes calls against his position with the goal of making income(ie premium collected from the sale of the contract)
SELLING SHORT: The sale of borrowed stock and the eventual replacement buyback at a lower price. To profit, the investor must believe that the price of the stock/security is going down.
VIX, according to Wikipedia is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of the S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from this volatility by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period. However, an upward surging VIX does not only mean there is a perception of an upcoming sell off but could also mean there could be uncertainty as the market moves to the upside. Some believe that the VIX is negatively correlated with the market because if the VIX surges due to increased uncertainty, cautious investors will be in turn buying puts to portray their expectation to the downside.
BULL SPREAD:Establishing a bull (call) spread involves the purchase of a call option on a particular underlying stock, while simultaneously writing a call option on the same underlying stock with the same expiration month, at a higher strike price. The price paid for the call with the lower strike price is partially offset by the premium received from writing the call with a higher strike price. If the investor is assigned an exercise notice on the written call and must sell an equivalent number of underlying shares at the strike price, those shares can be purchased at a predetermined price by exercising the purchased call with the lower strike price.
BEAR SPREAD:Establishing a bear (put) spread involves the purchase of a put option on a particular underlying stock, while simultaneously writing a put option on the same underlying stock with the same expiration month, but with a lower strike price. The price paid for the put with the higher strike price is partially offset by the premium received from writing the put with a lower strike price.If the investor is assigned an exercise notice on the written put, and must purchase an equivalent number of underlying shares at its strike price, he can sell the purchased put with the higher strike price in the marketplace. The premium received from the put's sale can partially offset the cost of purchasing the shares from the assignment.
BUTTERFLY: Traders often use the butterfly strategy when they feel a particular stock will remain neutral during a certain period. By entering into a butterfly trade, the trader is essentially betting that the underlying stock price will remain close to where it is currently. An example in a call strategy is: To execute this trade, the investor will need to buy two calls -- one at a low strike price and one at a higher strike price. The investor also needs to sell two options with strike prices at or near the current price.
IRON CONDOR:An advanced options strategy that involves buying and holding four different options with different strike prices. This strategy is mainly used when a trader has a neutral outlook on the movement of the underlying security from which the options are derived.
CALL OPTION: A call option gives an investor/trader the right to buy a set number of share of stock at a predetermined price until the option expires at some future point in time.
PUT OPTION: A put option gives an investor the right to sell a set number of shares of stock at a predetermined price over a given period of time.
STRIKE PRICE: The strike price is the price specified in an option contract.
PREMIUM: The premium is the fee charged for an option and premium prices are usually quoted on a per share basis. Many factors affect the premium price. For example, the longer the length of time before expiration, the higher the premium will be.
INTRINSIC VALUE: An intrinsic value is a value determined by the relationship of the stock price to the strike price. For instance, on a call option, the intrinsic value is when the stock price is above the strike price. On a put option, the intrinsic value is when the stock price is below the strike price.
IN-THE-MONEY: An option is considered to be 'In the Money' when it has an intrinsic value.
OUT-OF-THE MONEY: An option is considered to be 'Out of the money' when it has no intrinsic value.
AT-THE-MONEY: An option is considered to be At-The-Money when the stock price and the strike price are the same.
VOLATILITY: This is simply indicated by the frequent fluctuation in security prices.
LEAPS: (Long Term Equity Anticipation Securities) have longer-term expiration, up to three years in the future. They allow more conservative investors to enter the options market because of long term expiration.
COMMODITY FUTURES CONTRACT: is a commitment to either receive or deliver a specific amount of a specific commodity during a specific month at a price determined by open auction on a futures exchange.
FOREIGN CURRENCY EXCHANGE: is simply the price of one country's money in terms of another country's money.
BEAR: An investor who believes a stock or the overall market will decline. A bear market is a prolonged period of falling stock prices.
BULL: An investor who believes a stock or the overall market will rise.
CAPITAL GAIN: The difference between the net cost of a security and the net sale price if that security is sold at a profit.
COVERED CALL: A short call option position in which the writer owns the number of shares of the underlying stock represented by the option contracts. In other words, the holder owns the stock and sells/writes calls against his position with the goal of making income(ie premium collected from the sale of the contract)
SELLING SHORT: The sale of borrowed stock and the eventual replacement buyback at a lower price. To profit, the investor must believe that the price of the stock/security is going down.
VIX, according to Wikipedia is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of the S&P 500 index options. A high value corresponds to a more volatile market and therefore more costly options, which can be used to defray risk from this volatility by selling options. Often referred to as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period. However, an upward surging VIX does not only mean there is a perception of an upcoming sell off but could also mean there could be uncertainty as the market moves to the upside. Some believe that the VIX is negatively correlated with the market because if the VIX surges due to increased uncertainty, cautious investors will be in turn buying puts to portray their expectation to the downside.
BULL SPREAD:Establishing a bull (call) spread involves the purchase of a call option on a particular underlying stock, while simultaneously writing a call option on the same underlying stock with the same expiration month, at a higher strike price. The price paid for the call with the lower strike price is partially offset by the premium received from writing the call with a higher strike price. If the investor is assigned an exercise notice on the written call and must sell an equivalent number of underlying shares at the strike price, those shares can be purchased at a predetermined price by exercising the purchased call with the lower strike price.
BEAR SPREAD:Establishing a bear (put) spread involves the purchase of a put option on a particular underlying stock, while simultaneously writing a put option on the same underlying stock with the same expiration month, but with a lower strike price. The price paid for the put with the higher strike price is partially offset by the premium received from writing the put with a lower strike price.If the investor is assigned an exercise notice on the written put, and must purchase an equivalent number of underlying shares at its strike price, he can sell the purchased put with the higher strike price in the marketplace. The premium received from the put's sale can partially offset the cost of purchasing the shares from the assignment.
BUTTERFLY: Traders often use the butterfly strategy when they feel a particular stock will remain neutral during a certain period. By entering into a butterfly trade, the trader is essentially betting that the underlying stock price will remain close to where it is currently. An example in a call strategy is: To execute this trade, the investor will need to buy two calls -- one at a low strike price and one at a higher strike price. The investor also needs to sell two options with strike prices at or near the current price.
IRON CONDOR:An advanced options strategy that involves buying and holding four different options with different strike prices. This strategy is mainly used when a trader has a neutral outlook on the movement of the underlying security from which the options are derived.