Options Glossary

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Adjustment

The process of buying or selling instruments to bring your position delta back to zero and increase profits.

All Ordinaries Index

The major index of Australian stocks. This index represents 280 of the most active listed companies or the majority of the equity capitalization (excluding foreign companies) listed on the Australia Stock Exchange (ASX).

American Stock Exchange (AMEX)

A private, not-for-profit corporation, located in New York City, that handles approximately one-fifth of all securities trades within the United States.

American Style Option

An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.

Amortization

The paying off of debt in regular installments over a period of time.

Analyst

Employee of a brokerage or fund management house who studies companies and makes buy and sell recommendations on their stocks. Most specialize in a specific industry.

Annual Earnings Change Percent

The historical earnings change between the most recently reported fiscal year earnings and the preceding.

Annual Net Profit Margin Percent

The percentage that the company earned from gross sales for the most recently reported fiscal year.

Annual Percentage Rate (APR)

The cost of credit that the consumer pays, expressed as a simple annual percentage.

Annual Report

A report issued by a company to its shareholders at the end of the fiscal year containing a description of the firm's operations and financial statements.

Annual Return

The simple rate of return earned by an investment for each year.

Annuity

A series of constant payments at uniform time intervals (for example, periodic interest payments on a bond).

Appreciation

The increase in value of an asset.

Arbitrage

The simultaneous purchase and sale of identical financial instruments or commodity futures in order to make a profit where the selling price is higher than the buying price.

Arbitrageur

An individual or company that takes advantage of momentary disparities in prices between markets which enables them to lock in profits because the selling price is higher than the buying price.

ATM IV

A quadratic curve fit is made between the IV values and the strike prices for all the call options for a stock for a given expiration month. Likewise a curve fit is done for the puts. The option IV assigned for that option series fit is the constant coefficient of the polynomial. This constant coefficient is the point in the quadratic curve fit where the slope is zero and the option polynomial 'smile' is at a minimum. This option series IV is usually very close to the IV of the close price of the stock because the weights in the polynomial curve fit emphasize the At the Money (ATM) strikes. This option series IV is referred to as the ATM IV in the Optionetics option trade ranker tool.

At-the-Opening Order

An order which specifies execution at the opening of the market or else it is canceled.

Auction Market

A market in which buyers enter competitive bids and sellers enter competitive offers simultaneously. Most stock and bond markets, including those on the NYSE, function this way.

Automatic Exercise

The automatic exercise of an in-the-money option at expiration by the clearing firm.

Average

An mathematical representation of the behavior of a specific sector or index of the market (for example, the Dow Jones Industrial Average).