Glossary 971 
Good Until Canceled (GTC): a designation applied to some types of orders, mean­
ing that the order remains in effect until it is either filled or canceled. See also 
Limit, Stop-Limit Order, Stop Order. 
Hedge Ratio: the mathematical quantity that is equal to the delta of an option. It is 
useful in facilitation in that a theoretically riskless hedge can be established by tak­
ing offsetting positions in the underlying stock and its call options. See also Delta, 
Facilitation. 
Historic Volatility: See Volatility. 
Holder: the owner of a security. 
Horizontal Spread: an option strategy in which the options have the same striking 
price, but different expiration dates. 
Implied Volatility: a prediction of the volatility of the underlying stock, it is deter­
mined by using prices currently existing in the option market at the time, rather 
than using historical data on the price changes of the underlying stock See also 
Volatility. 
Incremental Return Concept: a strategy of covered call writing in which the 
investor is striving to earn an additional return from option writing against a stock 
position that he is targeted to sell, possibly at substantially higher prices. 
Index: a compilation of the prices of several common entities into a single number. 
See also Capitalization-Weighted Index, Price-Weighted Index. 
Index Arbitrage: a form of arbitraging index futures against stock If futures are 
trading at prices significantly higher than fair value, the arbitrager sells futures and 
buys the exact stocks that make up the index being arbitraged; if futures are at a 
discount to fair value, the arbitrage entails buying futures and selling stocks. 
Index Fund: a mutual fund whose components exactly match the stocks that make 
up a widely disseminated index, such as the S&P 500, Dow-Jones, Russell 2000, or 
NASDAQ-100. See also Exchange-Traded Fund. 
Index Option: an option whose underlying entity is an index. Most index options are 
cash-based. 
Institution: an organization, probably very large, engaged in investing in securities. 
Normally a bank, insurance company, or mutual fund. 
Intermarket Spread: a futures spread in which futures contracts in one market are 
spread against futures contracts trading in another market. Examples: Currency 
spreads (yen vs. deutsche mark) or TED spread (T-Bills vs. Eurodollars).