Glossary
Accrual
The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals, over the period of each deal.
Adjustments
Certain events such as a stock split or a stock dividend (e.g., a 3-for-2 stock split). An adjusted option may cover more than the usual one hundred shares. For example, after a 3-for-2 stock split, the adjusted option will represent 150 shares. For such options, the premium must be multiplied by a corresponding factor. Example: buying 1 call (covering 150 shares) at 4 would cost $600. See also Strike price interval
All-or-none order (AON)
A type of order which requires that the order be executed completely or not at all. An AON order may be either a day order or a GTC (good til cancel) order.
American-style option
An option that can be exercised at any time prior to its expiration date. See also European-style option
AMEX / ASE
American Stock Exchange.
Appreciation
A strengthening in price in response to market demand.
Arbitrage
A trading technique that involves the simultaneous purchase and sale of identical assets or of equivalent assets in two different markets (i.e. stocks and options on that same stock) with the intent of profiting by the price discrepancy.
Ask / ask price
The price at which a seller is offering to sell an option, a stock or any other security. In any quote, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.4527/32, the ask price is 1.4532; meaning you can buy one US dollar for 1.4532 Swiss francs. See also Assignment
Assigned (an exercise)
Received notification of an assignment by The Options Clearing Corporation. See also Assignment
Assignment
Notification by The Options Clearing Corporation to a clearing member that an owner of an option has exercised his or her rights there under. For equity and index options, assignments are made on a random basis by The Options Clearing Corporation. See also Delivery and Exercise
At Best
An instruction given to a dealer to buy or sell at the best rate that can be obtained.
At or Better
An order to deal at a specific rate or better.
At-The-Money
A term that describes an option with a strike price that is equal to the current market price of the underlying stock.
Averaging down
Buying more of a stock or an option at a lower price than the original purchase so as to reduce the average cost.