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