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