972 Glossary 
In-the-Money: a term describing any option that has intrinsic value. A call option is 
in-the-money if the underlying security is higher than the striking price of the call. 
A put option is in-the-money if the security is below the striking price. See also 
Intrinsic Value, Out-of-the-Money. 
Intramarket Spread: a futures spread in which futures contracts are spread against 
other futures contracts in the same market; example, buy May soybeans, sell 
March soybeans. 
Intrinsic Value: the value of an option if it were to expire immediately with the 
underlying stock at its current price; the amount by which an option is in-the­
money. For call options, this is the difference between the stock price and the 
striking price, if that difference is a positive number, or zero otherwise. For put 
options it is the difference between the striking price and the stock price, if that 
difference is positive, and zero otherwise. See also In-the-Money, Parity, Time 
Value Premium. 
Last Trading Day: the third Friday of the expiration month. Options cease trading 
at 3:00 P.M. Eastern Time on the last trading day. 
LEAPS: Long-term Equity Anticipation Securities. These are long-term listed 
options, currently having maturities as long as two and one-half years. 
Leg: a risk-oriented method of establishing a two-sided position. Rather than enter­
ing into a simultaneous transaction to establish the position (a spread, for exam­
ple), the trader first executes one side of the position, hoping to execute the other 
side at a later time and a better price. The risk materializes from the fact that a 
better price may never be available, and a worse price must eventually be accept­
ed. 
Letter of Guarantee: a letter from a bank to a brokerage firm stating that a cus­
tomer (who has written a call option) does indeed own the underlying stock and 
the bank will guarantee delivery if the call is assigned. Thus, the call can be con­
sidered covered. Not all brokerage firms accept letters of guarantee. 
Leverage: in investments, the attainment of greater percentage profit and risk 
potential. A call holder has leverage with respect to a stockholder-the former will 
have greater percentage profits and losses than the latter, for the same movement 
in the underlying stock. 
Limit: see Trading Limit. 
Limit Order: an order to buy or sell securities at a specified price (the limit). A limit 
order may also be placed "with discretion" -a fixed; usually small, amount such as 
1/s or ¼ of a point. In this case, the floor broker executing the order may use his