Glossary 
American Exercise: a feature of an option that indicates it may be exercised at any 
time. Therefore, it is subject to early assignment. 
Arbitrage: the process in which professional traders simultaneously buy and sell the 
same or equivalent securities for a riskless profit. See also Risk Arbitrage. 
Assign: to designate an option writer for fulfillment of his obligation to sell stock (call 
option writer) or buy stock (put option writer). The writer receives an assignment 
notice from the Options Clearing Corporation. See also Early Exercise. 
Assignment Notice: see Assign. 
Automatic Exercise: a protection procedure whereby the Options Clearing 
Corporation attempts to protect the holder of an expiring in-the-money option by 
automatically exercising the option on behalf of the holder. 
Average Down: to buy more of a security at a lower price, thereby reducing the 
holder's average cost. (Average Up: to buy more at a higher price.) 
Backspread: see Reverse Strategy. 
Bear Spread: an option strategy that makes its maximum profit when the underly­
ing stock declines and has its maximum risk if the stock rises in price. The strate­
gy can be implemented with either puts or calls. In either case, an option with a 
higher striking price is purchased and one with a lower striking price is sold, both 
options generally having the same expiration date. See also Bull Spread. 
Bearish: an adjective describing an opinion or outlook that expects a decline in 
price, either by the general market or by an underlying stock, or both. See also 
Bullish. 
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