Glossary
Immediate-or-cancel order (IOC)
A type of option order which gives the trading crowd one opportunity to take the other side of the trade. After being announced, the order will be either partially or totally filled with any remaining balance immediately cancelled. An IOC order, which can be considered a type of day order, cannot be used as part of a GTC order since it will be cancelled shortly after being entered. The difference between fill-or-kill (FOK) orders and IOC orders is that a IOC order may be partially executed.
Implied volatility
The estimated volatility of a security's price. Typically, implied volatility increases when the market is bearish and decreases when the market is bullish. This is due to the common belief that bearish markets are more risky than bullish markets.
The Implied volatility of an option contract is the volatility implied by the market price of the option based on an option pricing model. (i.e. it is the volatility that, when used in a particular pricing model, yields a theoretical value for the option equal to the current market price of that option.
Implied volatility is sometimes referred to as "vols."
See also Individual volatility
In-The-Money
An adjective used to describe an option with intrinsic value. A call option is in the money if the stock price is above the strike price. A put option is in the money if the stock price is below the strike price.
In-the-money option
An adjective used to describe an option with intrinsic value. A call option is in the money if the stock price is above the strike price. A put option is in the money if the stock price is below the strike price.
Index
A compilation of several stock prices into a single number. Example: the S&P 100 Index.
Index option
An option whose underlying interest is an index. Generally, index options are cash-settled.
Individual volatility
The volatility percentage that justifies an option's price, as opposed to historic or implied volatility. A theoretical option pricing model can be used to generate an option's individual volatility when the five remaining quantifiable factors (stock price, time until expiration, strike price, interest rates, and cash dividends) are entered along with the price of the option itself.
Industrial Production
Measures the total value of output produced by manufacturers, mines and utilities. This data tends to react quickly to the expansions and contractions of the business cycle and can act as a leading indicator of employment and personal income.
Inflation
An economic condition whereby prices for consumer goods rise, eroding purchasing power.
Initial Margin
The initial deposit of collateral required to enter into a position as a guarantee on future performance.
Institution
A professional investment management company. Typically, this term is used to describe large money managers such as banks, pension funds, mutual funds, and insurance companies.
Interbank Rates
The Foreign Exchange rates at which large international banks quote other large international banks.
Intervention
Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.
Intrinsic value
The in-the-money portion of an option's price. See also In-the-money option
Iron butterfly
An option strategy with limited risk and limited profit potential that involves both a long (or short) straddle, and a short (or long) combination. An iron butterfly contains four options as is an equivalent strategy to a regular butterfly spread which contains only three options. For example, a short iron butterfly might be: buying 1 XYZ May 60 call and 1 May 60 put, and writing 1 XYZ May 65 call and writing 1 XYZ May 55 put.
ISE
International Securities Exchange.
ISM Manufacturing Index
An index that assesses the state of US manufacturing sector by surveying executives on expectations for future production, new orders, inventories, employment and deliveries. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.
ISM Non-Manufacturing
An index that survey service sector firms for their outlook, representing the other 80% of the U.S. economy not covered by ISM MANUFACTURING REPORT. Values over 50 generally indicate an expansion, while values below 50 indicate contraction.