Options Definitions

Option Pricing Model

A mathematical model used to calculate the theoretical value of an option. Inputs to option pricing models typically include the price of the underlying instrument, the option strike price, the time remaining till the expiration date, the volatility of the underly

Option Buyer

The person who buys calls, puts, or any combination of calls and puts.

Option

A contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument. Also see Put and Cal

Class (of options)

Options of the same type (i.e., either puts or calls, but not both) and style (American, European) covering the same underlying futures contract or other asset.

Writer

The issuer, grantor, or seller of an option contract.

Christmas Tree Spread

A spread that involves the simultaneous purchase and writing of options with either a different strike price or expiration date or a combination of the two.

Chooser Option

An exotic option that is transacted in the present, but that at some specified future date is chosen to be either a put or a call option. The investor has the opportunity to choose whether the option is a put or call at a certain point in time during the life of t

Grantor

The maker, writer, or issuer of an option contract who, in return for the premium paid for the option, stands ready to purchase the underlying commodity (or futures contract) in the case of a put option or to sell the underlying commodity (or futures contract) in

NYMEX Lookalike

A lookalike swap or lookalike option that is based on a futures contract traded on the New York Mercantile Exchange (NYMEX).

Nominal Price (or Nominal Quotation)

Computed price quotation on a futures or option contract for a period in which no actual trading took place, usually an average of bid and asked prices or computed using historical or theoretical relationships to more active contracts.