{"id":25655,"date":"2013-05-17T11:29:35","date_gmt":"2013-05-17T05:59:35","guid":{"rendered":"http:\/\/vskills.in\/certification\/tutorial\/?p=25655"},"modified":"2024-04-12T14:18:20","modified_gmt":"2024-04-12T08:48:20","slug":"option-terminology","status":"publish","type":"page","link":"https:\/\/www.vskills.in\/certification\/tutorial\/option-terminology\/","title":{"rendered":"Option Terminology"},"content":{"rendered":"\n
\"\"<\/a><\/figure><\/div>\n\n\n

Option Terminology<\/strong><\/h3>\n

Let’s learn more about the option terminology.<\/p>\n

Call:<\/strong> An option contract giving the buyer the right, but not the obligation, to purchase a commodity or other asset or to enter into a long futures position.<\/p>\n

Put:<\/strong> An option contract that gives the holder the right, but not the obligation, to sell a specified quantity of a particular commodity or other interest at a given, prior to or on a future date.<\/p>\n

Premium:<\/strong> Premium is the price of an option. The premium the purchaser of the option pays is the maximum loss that it can incur. The writer charges a premium that reflects a calculation of the value of the underlying and of the risk incurred in selling the option. Please see the value of premium for further discussion.<\/p>\n

Volatility:<\/strong> Volatility is the market term for standard deviation as statistical measure of risk . Where risk is the potential for deviation from expectations around a trend and that expectation is expressed as a statistical mean the value of the risk can be calculated as the square root of the variance of the underlying.<\/p>\n

Delta:<\/strong> The ratio by which the price of the option moves in relation to the underlying. See delta.<\/p>\n

At The Money (ATM):<\/strong> When the exercise price of the option equals the price of the underlying.<\/p>\n

Out of The Money (OTM):<\/strong> An option with no intrinsic value. The strike of a call is above the prevailing market rate, of a put below the prevailing market rate. This option should still have time value until it moves “deep” Out of The Money.<\/p>\n

In The Money (ITM):<\/strong> An option with intrinsic value. The strike of a call is below the prevailing market rate, of a put above the prevailing market rate. This option will also have time value.<\/p>\n

Gamma:<\/strong> The sensitivity of the delta to a change in the price of the underlying.<\/p>\n

Theta:<\/strong> A measure of time decay on the value of the option as it moves closer to maturity. The rate of change in the option price for a unit change in time.<\/p>\n

Intrinsic Value:<\/strong>\u00a0The amount an option is in-the-money. Obviously, only in-the-money options have intrinsic value.<\/p>\n\n\n

Back to Tutorial<\/a><\/p>\n\n\n\n

\"certified<\/a><\/figure><\/div>\n","protected":false},"excerpt":{"rendered":"

Option Terminology Let’s learn more about the option terminology. Call: An option contract giving the buyer the right, but not the obligation, to purchase a commodity or other asset or to enter into a long futures position. 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