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at the money

at the money  

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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 ...
back spread

back spread  

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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

capital fulcrum point  

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(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 ...
deferred-payment American-style option

deferred-payment American-style option  

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A type of option which allows the holder to set the price at which the exercise will take place prior to expiry. This type of option is far more common ...
discount arbitrage

discount arbitrage  

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The purchase of an option which is trading at less than its intrinsic value (that is at a discount) while taking short position in the underlying. The combined position gives the holder a risk-free ...
forced conversion

forced conversion  

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The exercise of a convertible security as a result of the issuer being able to force conversion.
forward intrinsic value of an option

forward intrinsic value of an option  

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(FIV).The intrinsic value of an option plus the fair value of the forward on which the option is written. Given the boundary conditions that apply to options, a European-style ...
in the money

in the money  

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Describing an option that would generate a gain if currently exercised. An option that would generate a loss is described as being out of the money, whereas one that would generate neither a gain nor ...
mean reversion investment theory

mean reversion investment theory  

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A quantitative method of investing or portfolio management which involves buying those stocks which have shown statistical evidence of undershooting their intrinsic value. It is based on the ...
option pricing

option pricing  

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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

out of the money  

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(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 ...
parity

parity  

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1 An equality between prices of commodities, currencies, or securities on separate markets.2 A fixed exchange rate.3 Another term for par value.
premium

premium  

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1 The price paid for an insurance policy. This may be a monthly or annual payment, or it is possible to take out a single-premium policy by a lump-sum payment.2 A share price higher than the issue ...
strike

strike  

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1 The price or interest rate at which an option may be exercised (cf. adjusted exercise price; call price; exercise price; expiry date; expiry time; put price). That is, it ...
time value

time value  

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The market value of an option over and above its intrinsic value. The time value represents the value of the possibility that a movement in the price of the underlying will make the option worth ...
time value of an option

time value of an option  

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The value of the time to expiration of an option, taken as the difference between the option premium or price and the intrinsic value when this is positive (cf. time ...
time value premium

time value premium  

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The difference between an option's price and its intrinsic value.Time value premium = option value − intrinsic valueSee time value of an option.

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