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CBOE

The Chicago Board Options Exchange; the first national exchange to trade listed stock options.

Calendar Spread

An option strategy in which a short-term option is sold and a longer-term option is bought, both having the same striking price. Either puts or calls may b...

Calendar Straddle or Combination

See Calendar Spread.

Call

An Option contract that gives the holder the right to buy the underlying security at a specified price for a certain, fixed period of time. See also Put.

Call Option

The right, but not the obligation, to buy a security at a fixed price.

Capitalization-Weighted Index

A stock index which is computed by adding the capitalization (float times price) of each individual stock in the index, and then dividing by the divisor. T...

Capped-Style Option

A capped option is an option with an established profit cap or cap price. The cap price is equal to the option's strike price plus a cap interval for a cal...

Carrying Cost

The interest expense on a debit balance created by establishing a position.

Cash Settlement

The process by which the terms of an option contract are fulfilled through the payment or receipt in dollars of the amount by which the option is in-the-mo...

Cash-Based

Referring to an option or future that is settled in cash when exercised or assigned. No physical entity, either stock or commodity, is received or delivere...

Chain

The list of all the options associated with the same underlying security.

Class

A term used to refer to all put and call contracts on the same underlying security.

Class of Options

Option contracts of the same type (call or put) and Style (American, European or Capped) that cover the same underlying security.

Closing Purchase

A transaction in which the purchaser's intention is to reduce or eliminate a short position in a given series of options.

Closing Sale

A transaction in which the seller's intention is to reduce or eliminate a long position in a given series of options

Closing Transaction

A trade that reduced an investor's position. Closing buy transactions reduce short positions and closing sell transactions reduce long positions. See also...

Collateral

The loan value of marginable securities; generally used to finance the writing of uncovered options.

Combination

Any position involving both put and call options that is not a straddle.

Commodities

See Futures Contract.

Contingent Order

An order which can be executed only if another event occurs; i.e. "sell Oct 45 call 7.25 with stock 52 or lower".

Conversion Arbitrage

A riskless transaction in which the arbitrageur buys the underlying security, buys a put, and sells a call. The options have the same terms. See also Rever...

Conversion Ratio

See Convertible Security.

Converted Put

See Synthetic Put.

Convertible Security

A security that is convertible into another security. Generally, a convertible bond or convertible preferred stock is convertible into the underlying stock...

Cover

To buy back as a closing transaction an option that was initially written.

Covered

A written option is considered to be covered if the writer also has an opposing market position on a share-for-share basis in the underlying security. That...

Covered Call

An option strategy in which a call option is written against long stock on a share-for-share basis.

Covered Call Option Writing

A strategy in which one sells call options while simultaneously owning an equivalent position in the underlying security or strategy in which one sells put...

Covered Put Write

A strategy in which one sells put options and simultaneously is short an equal number of shares of the underlying security.

Covered Straddle

An option strategy in which one call and one put with the same strike price and expiration are written against 100 shares of the underlying stock. In actua...

Covered Straddle Write

The term used to describe the strategy in which an investor owns the underlying security and also writes a straddle on that security. This is not really a...

Credit

Money received in an account. A credit transaction is one in which the net sale proceeds are larger than the net buy proceeds (cost), thereby bringing mone...

Cycle

The expiration dates applicable to various classes of options. There are three cycles: January/April/July/October, February/May/August/November, and March/...