964 Glossary 
Beta: a measure of how a stock's movement correlates to the movement of the entire 
stock market. The beta is not the same as volatility. See also Standard Deviation, 
Volatility. 
Black Model: a model used to predict futures option prices; it is a modified version 
of the Black-Scholes model. See Model. 
Board Broker: the exchange member in charge of keeping the book of public 
orders on exchanges utilizing the "market-maker" system, as opposed to the "spe­
cialist system," of executing orders. See also Market-Maker, Specialist. 
Box Spread: a type of option arbitrage in which both a bull spread and a bear spread 
are established for a riskless profit. One spread is established using put options and 
the other is established using calls. The spreads may both be debit spreads ( call 
bull spread vs. put bear spread), or both credit spreads (call bear spread vs. put 
bull spread). 
Break-Even Point: the stock price (or prices) at which a particular strategy neither 
makes nor loses money. It generally pertains to the result at the expiration date of 
the options involved in the strategy. A "dynamic" break-even point is one that 
changes as time passes. 
Broad-Based: generally referring to an index, it indicates that the index is composed 
of a sufficient number of stocks or of stocks in a variety of industry groups. Broad­
based indices are subject to more favorable treatment for naked option writers. 
See also Narrow- Based. 
Bull Spread: an option strategy that achieves its maximum potential if the underly­
ing security rises far enough, and has its maximum risk if the security falls far 
enough. An option with a lower striking price is bought and one with a higher strik­
ing price is sold, both generally having the same expiration date. Either puts or 
calls may be used for the strategy. See also Bear Spread. 
Bullish: describing an opinion or outlook in which one expects a rise in price, either 
by the general market or by an individual security. See also Bearish. 
Butterfly Spread: an option strategy that has both limited risk and limited profit 
potential, constructed by combining a bull spread and a bear spread. Three strik­
ing prices are involved, with the lower two being utilized in the bull spread and the 
higher two in the bear spread. The strategy can be established with either puts or 
calls; there are four different ways of combining options to construct the same 
basic position. 
Calendar Spread: an option strategy in which a short-term option is sold and a 
longer-term option is bought, both having the same striking price. Either puts or