36 lines
2.5 KiB
Plaintext
36 lines
2.5 KiB
Plaintext
Glossary 967
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Cycle: the expiration dates applicable to various classes of options. There are three
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cycles: January/April/July/October, February/May/ August/November, and
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March/J une/Septem ber/Decem ber.
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Debit: an expense, or money paid out from an account. A debit transaction is one in
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which the net cost is greater than the net sale proceeds. See also Credit.
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Deliver: to take securities from an individual or firm and transfer them to another
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individual or firm. A call writer who is assigned must deliver stock to the call hold
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er who exercised. A put holder who exercises must deliver stock to the put writer
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who is assigned.
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Delivery: the process of satisfying an equity call assignment or an equity put exer
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cise. In either case, stock is delivered. For futures, the process of transferring the
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physical commodity from the seller of the futures contract to the buyer.
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Equivalent delivery refers to a situation in which delivery may be made in any of
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various, similar entities that are equivalent to each other (for example, Treasury
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bonds with differing coupon rates).
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Delta: (1) the amount by which an option's price will change for a corresponding 1-
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point change in price by the underlying entity. Call options have positive deltas,
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while put options have negative deltas. Technically, the delta is an instantaneous
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measure of the option's price change, so that the delta will be altered for even frac
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tional changes by the underlying entity. Consequently, the terms "up delta" and
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"down delta" may be applicable. They describe the option's change after a full 1-
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point change in price by the underlying security, either up or down. The "up delta"
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may be larger than the "down delta" for a call option, while the reverse is true for
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put options. (2) the percent probability of a call being in-the-money at expiration.
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See also Hedge Ratio.
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Delta Neutral Spread: a ratio spread that is established as a neutral position by uti
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lizing the deltas of the options involved. The neutral ratio is determined by divid
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ing the delta of the purchased option by the delta of the written option. See also
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Delta, Ratio Spread.
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Depository Trust Corporation (OTC): a corporation that will hold securities for
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member institutions. Generally used by option writers, the DTC facilitates and
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guarantees delivery of underlying securities when assignment is made against
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securities held in DTC.
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Diagonal Spread: any spread in which the purchased options have a longer matu
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rity than do the written options, as well as having different striking prices. Typical |