all-or-nothing option
A type of exotic option which pays either a predetermined amount or nothing, depending on whether it is in the money or not. See digital option.
American-style option
A put or call option that may be exercised at any time over an extended period up to its expiry date, unlike a European-style option which is exercisable only at ...
at the money
Describing a call or put option in which the exercise price is the same (or very nearly the same) as the current market price of the underlying. Such an option has no intrinsic value but will have ...
automatic exercise
The practice that options which are in the money at expiry are automatically exercised by the clearing house or the counterparty without specific instructions (cf. cabinet trade). The assumption is ...
back spread
The strategy of selling an option near to or at the money (see at-the-money option) and using the premium to buy a number of the same types of option out of the money (see intrinsic value). If this ...
capital fulcrum point
(CFP).The indifference point between buying a warrant rather than the stock in a company. It is an indication of the required annual growth in the firm's stock to the ...
contingent premium option
Type of option where no premium is paid when purchased, but where the premium is contingent on the option expiring in the money. Such an option is more expensive than ...
cushion bond
A high-coupon bond that sells at a moderate premium because it is callable and the call is in the money. It will thus be trading on a yield-to-call basis. If ...
digital option
A type of option where, unlike a normal option, the payout is fixed. There are two types: all-or-nothing and one-touch options. All-or-nothing will pay out the fixed amount if the ...
intrinsic value
When a traded option is in the money, the difference between the exercise price of the option and the market value of the underlying. If the option is not in the money, the intrinsic value is zero. ...
iron butterfly
Option strategy which involves the purchase of a straddle and the sale of a strangle. For example, it can be set up by selling a put at one strike price ...
lambda
A measure of the relationship between the value of an option and the rate of interest. See greeks.
mambo combo
Option strategy or combination involving a put and a call, both of which are in the money.
money spread
A type of option strategy which involves the purchase and sale of two options of the same type (that is either calls or puts) with the same expiry date but ...
moneyness
The current status of a trading option. In terms of its being in the money, at the money, or out of the money.
near the money
A situation where the underlying price or rate is close to the strike price. See also at the money; delta; gamma; in the money; out of the money.
neutral hedge ratio
The option price sensitivity to a small change in price of the underlying. It is the first partial derivative of the option price in respect to the underlying and is ...
option pricing
The minimum and maximum value of an option, or its price boundary conditions, are as follows:Minimum value of calls: An American-style call: should sell for nothing (i.e. be worthless) or ...
out of the money
(OTM).1 A position standing at a loss due to adverse market, price or rate movements (cf. book loss).2 An option without intrinsic value. A call option is out ...
participating cap
An interest-rate cap in which the protection afforded to the lender is considered inadequate from a risk-management perspective.
