Glossary 981 
Terms: the collective name denoting the expiration date, striking price, and under­
lying stock of an option contract. 
Theoretical Value: the price of an option, or a spread, as computed by a mathe­
matical model. 
Theta: the measure of how much an option's price decays for each day of time that 
passes. 
Time Spread: see Calendar Spread. 
Time Value Premium: the amount by which an option's total premium exceeds its 
intrinsic value. 
Total Return Concept: a covered call writing strategy in which one views the 
potential profit of the strategy as the sum of capital gains, dividends, and option 
premium.income, rather than viewing each one of the three separately. 
Tracking Error: the amount of difference between the performance of a specific 
portfolio of stocks and a broad-based index with which they are being compared. 
See Market Basket. 
Trader: a speculative investor or professional who makes frequent purchases and 
sales. 
Trading Limit: the exchange-imposed maximum daily price change that a futures 
contract or futures option contract can undergo. 
Treasury BilVOption Strategy: a method of investment in which one places 
approximately 90% of his funds in risk-free, interest-bearing assets such as 
Treasury bills, and buys options with the remainder of his assets. 
Type: the designation to distinguish between a put or call option. 
Uncovered Option: a written option is considered to be uncovered if the investor 
does not have a corresponding position in the underlying security. See also 
Covered. 
Underlying Security: the security that one has the right to buy or sell via the terms 
of a listed option contract. 
Undervalued: describing a security that is trading at a lower price than it logically 
should. Usually determined by the use of a mathematical model. See also Fair 
Value, Overvalued. 
Variable Ratio Write: an option strategy in which the investor owns 100 shares of 
the underlying security and writes two call options against it, each option having a 
different striking price.