This article is from the Investing Articles: Stocks and Options series.
Previously referred to as Margin Call. A demand for additional funds because of adverse price movement.
An options price has two components. They are the intrinsic value and time value. Premium is often referred to as time value. In the money call option - option strike 65. Underlying security is 67. Option price is 3. This is two points of intrinsic value and 1 point of premium. An out of the money call where the strike price is 65 and the underlying security is at 63 and the price of the option is 1-1/2. The premium would be 1-1/2. As there is no intrinsic value.
The excess of one futures contract price over that of another, or over the cash market price. Or, The amount agreed upon between the purchaser and seller for the purchase or sale of a futures option. Remember that purchasers pay the premium and sellers (writers) receive the premium.
An option contract that gives the holder the right to sell the underlying security at a specified price for a fixed period of time.
A decline in prices following an advance. The opposite of rally. An upward movement of prices following a decline; the opposite of a reaction.
A person employed by, and soliciting business for, a commission house or a broker dealer. Many times referred to as a broker.
Procedure by which a long or short position is offset by an opposite transaction or by accepting or making delivery of the actual financial instrument or physical commodity.