Options Trading Definitions

Series (of Options)

Options of the same type (i.e., either puts or calls, but not both), covering the same underlying futures contract or other underlying instrument, having the same strike price and expiration date

American Option

An option that can be exercised at any time prior to or on the expiration date. See also: European Option

Aggregate Exercise Price

The exercise (strike) price of a a put or call option multiplied by the number of underlying securities involved in the contract (contract size). When calculating the aggregate exercise price, the premium paid or received on the option is not considered. Aggregate exercise prices are used to calcula

Intrinsic Value

A measure of the value of an option or a warrant if immediately exercised, that is the extent to which it is in-the-money. The amount by which the current price for the underlying commodity or futures contract is above the strike price of a call option or below the strike

Diagonal Spread

A spread between two call options or two put options with different strike prices and different expiration dates. See also: Horizontal Spread, Vertical Spread

S&P 100 Index (OEX)

The Standard & Poor’s 100 is an index of stocks whose options trade on the Chicago Board Options Exchange. OEX is the symbol for options on the S&P 100 Index. The S&P 100 Index is a market-capitalization weighted index consisting of 100 large blu

Delta Neutral

Refers to a position involving options that is designed to have an overall delta of zero.

Delta Margining or Delta-Based Margining

An option margining system used by some exchanges that equates the changes in option premiums with the changes in the price of the underlying futures contract to determine risk factors upon which to base the margin requirements.

In-The-Money

A term used to describe an option contract that has a positive value if exercised. A call with a strike price of $390 on gold trading at $400 is in-the-money 10 dollars. See also: Intrinsic Value

Rho

Rho is a measure of an options fair value based on interest rate movement. It measures how sensitive an option is to a change in interest rate. For example if an option has a Rho of 10, each percentage point increase will see a 10 cent increase in the value of the option.