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spread strategy - Buying and selling puts and calls with the same
Exercise price but different
Expiration dates, and trying to
Profit from the different premiums of the options.
Time until expiration - The time remaining until a
Contract expires. Also called time to maturity.
Time value of an option - The portion of an option's
premium that is based
On the amount of time remaining until the
Expiration date of the option contract, and the idea that the
Underlying components that determine the value of the option may
change during that time. Time value is generally equal to the difference
between the premium and the intrinsic value.
Uncovered call - A short
Call option position in which the writer does not own
Shares of underlying
Stock represented by the option contracts. Uncovered calls are much
riskier for the writer than a
Covered call, where the writer of the
Uncovered call owns the
Underlying stock. If the buyer of a call exercises the option to
call, the writer would be forced to
Asset at the current
Market price. Also called a "naked" asset.
Uncovered put - A
Short put option position in which the writer does not have a
Stock position or has not deposited, in a
Cash account, cash or cash equivalents equal to the
Exercise value of the put. The writer has pledged to
Asset at a certain price if the buyer of the option chooses to
Uncovered put options limit the writer's
Risk to the value of the stock (adjusted for premium received.) Also
called "naked" puts.
Underlying asset - The security or property or
Loan agreement that an option gives the
Option holder the
Buy or to sell.
Volatility risk - The
Risk in the value of options portfolios due to the unpredictable
changes in the volatility of the
Write call - Sell a call when owning the underlying
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