American option  An option that the holder may exercise at a time of their choosing until the expiry date. 
Assignment
(option assignment) 
An assignment requiring the writer of an option to follow through should the option be exercised by the buyer.
In such a case, the option writer receives an exercise notice that requires them to sell (in the case of a call option) or buy (in the case of a put option) the underlying interest at the strike price stipulated in the contract. 
Atthemoney option  An option that has a strike price equal to the underlying interest’s price or the strike price which is the closest to the underlying interest’s price.
The terms “nearthemoney” and “closetothemoney” may also be used. 
Bear spread  A bearish strategy involving the purchase of an option with a higher strike price and the sale of an option with a lower strike price, where the two options usually have the same expiry date. An investor can build this strategy either with call options (credit spread) or put options (debit spread). 
Breakeven point  The market price at which a trading strategy generates zero profit and causes no loss. 
Bull spread  A bullish strategy involving the purchase of an option with a lower strike price and the sale of an option with a higher strike price, where the two options usually have the same expiry date. An investor can build this strategy either with call options (debit spread) or put options (credit spread). 
Call option
(call) 
An option contract that gives the holder the right (with no obligation) to buy a specified quantity of the underlying interest at a specified strike price, at a time of their choosing until the contract expiry date (or only on the expiry date in the case of a European option), and that requires the writer to sell the underlying interest according to these terms should the holder exercise their right. 
Closing [option] trade
(offsetting trade) (closing transaction) (offsetting transaction) 
Either the sale of an option originally bought or the purchase of an option originally sold. 
Collar  A hedging strategy involving the purchase of a put option and the simultaneous sale of a call option having both the same expiry date but different strike prices, as well as a long position on the underlying interest. Such a strategy allows an investor to hedge to some extent against an adverse variation of the price of an underlying interest they own. 
Covered [option] writing
(overwriting) 
The writing of a call option by an investor who holds a sufficient quantity of the underlying interest to fulfill their sale obligation should the written option be exercised. 
Credit spread  An option spread where the total premiums received for the short options is higher than the total premiums paid for the long options, resulting in a credit when initiating the strategy. 
Debit spread  An option spread where the total premiums received for the short options is lower than the total premiums paid for the long options, resulting in a debit when initiating the strategy. 
Delta  A measure of the marginal variation of an option’s premium based on the marginal variation of the underlying interest’s price, all other things being equal.
The delta of a call option has either a positive value or no value; the delta of a put option has either a negative value or no value.
This value indicates the probability that the option will expire in the money and therefore be exercised. 
European option  An option which the holder can only exercise on the expiry date. 
Exercise an option, to  To exercise, as the holder on an option, one’s right to buy (in the case of a call option) or sell (in the case of a put option) the underlying interest according to the terms specified in the option contract. 
Exotic option  A call or put option that has unusual characteristics (e.g. with regards to the underlying interest, the strike price, the expiry date, or the payment structure) which differ from those of vanilla options. In general, exotic options are traded overthecounter. 
Expiry date [of an option]
(expiration date) 
The date on which an option contract expires.
Options other than weekly options expire on the third Friday of the expiry month provided that it is a business day; otherwise they expire on the first business day preceding that Friday.
Weekly options expire on any of the five weeks which follow the listing week and on which no other option listed on the same underlying interest expires. Weekly options expire on a Friday provided that it is a business day; otherwise they expire on the first business day preceding that Friday. 
Gamma  A measure of the marginal variation of an option’s delta based on the marginal variation of the underlying interest’s price, all other things being equal. 
Implied volatility [of an option]  The volatility of the underlying interest’s price which is determined using an option pricing model and is implied in the option’s premium. 
Inthemoney option  Either a call option that has a strike price below the underlying interest’s price, or a put option that has a strike price above the underlying interest’s price. 
Intrinsic value  The positive difference between the underlying interest’s price and the strike price of a call option or between the strike price of a put option and the underlying interest’s price. By definition, the intrinsic value cannot be negative. 
Last trading day [of an option]  The last day on which an option can be traded. This is the date on which the option expires. 
Leverage  A means to amplify (positive or negative) return on investment through the use of derivatives (options or futures) rather than their underlying interests. 
Margin requirement [for writing an option]
(margin coverage) 
The cash amount or the securities that must be deposited with the broker before writing an option in order to guarantee the purchase or delivery of the underlying interest in case the option is exercised. 
Naked [option] writing  The sale of a call option or the purchase of a put option without holding an equivalent quantity of the underlying interest or the cash required to fulfill the sale or purchase obligation should the written option be exercised. 
Open interest [of an option]  The number of option contracts with the same characteristics (strike price and expiry date) on a particular underlying interest that have not yet been exercised or bought back. If both the buyer and the writer of an option execute an opening trade, the open interest increases; conversely, if both the buyer and the writer of an option execute a closing trade, the open interest decreases. 
Option buyer  An investor who buys an option contract. The buyer of an option pays a premium to its writer in exchange for the right to exercise the option according to the terms of the contract or to let it expire worthless. The option buyer can also resell the option on the market until its expiry date. 
Option class  All of the option contracts (call options and put options) that have the same underlying interest. 
Option Greeks
(Greeks) 
A group of five indicators (delta, gamma, rho, theta, and vega) used to assess the price sensitivity of an option to specific determining factors marginal variations. 
Option series  All options in the same class that have the same strike price and the same expiry date. 
Option spread  A trading strategy involving the purchase and the sale of options. 
Option strategy  A trading strategy involving options. 
Option type  The classification of an option contract as a call option or a put option. 
Outofthemoney option  Either a call option that has a strike price above the underlying interest’s price, or a put option that has a strike price below the underlying interest’s price. 
Premium
(option premium) (option price) 
The price that the buyer pays to the seller for the rights associated with the option contract. 
Put option
(put) 
An option contract that gives the holder the right (with no obligation) to sell a specified quantity of the underlying interest at a specified strike price, at a time of their choosing until the contract expiry date (or only on the expiry date in the case of a European option), and that requires the writer to buy the underlying interest according to these terms should the holder exercise their right. 
Rho
*Rho 
A measure of the marginal variation of an option’s premium based on the marginal variation of the riskfree rate, all other things being equal.
The rho of a call option has a positive value; the rho of a put option has a negative value. 
Roll a position, to  To close a position and simultaneously open a new similar position expiring at a later date. 
Rollover
(roll forward)

The replacement of a position with a similar position expiring at a later date. 
Straddle  A trading strategy involving the simultaneous purchase (or sale) of a call option and a put option with the same characteristics (same underlying interest, expiry month, and strike price). 
Strangle  A trading strategy involving the simultaneous purchase (or the sale) of a call option and a put option on the same underlying interest, with the same expiry month but with different strike prices. 
Strike price
(exercise price) 
The price specified in the option contract at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying interest. 
Theta  A measure of the marginal variation of an option’s premium based on the passage of time until the option’s expiry, all other things being equal. Also referred to as time decay.
Time decay is not linear. It tends to accelerate as the expiry date approaches. 
Time value
(time premium) (extrinsic value) 
The portion of an option’s premium that represents the remaining time until the expiry of the option contract and the fact that the factors which determine the value of the option’s premium can change during this period. The time value is equal to the difference between the option’s premium and the intrinsic value. The time value is usually positive and decreases with the passage of time in a nonlinear fashion. 
Underlying interest
(underlying) (underlying asset) 
An asset that underlies and determines the value of a derivative instrument. The underlying interest may be a commodity, a financial instrument, or any other asset. 
Vanilla option
(plain vanilla option) (simple option) 
A call or put option that has no unusual characteristics. Exchangetraded options are vanilla options. 
Vega
*Véga 
A measure of the marginal variation of an option’s premium based on the marginal variation of the underlying interest’s implied volatility, all other things being equal. 
Volatility  The level of variability of a rate or a security’s price through time as measured by the standard deviation of such rate or security’s price. In general, high volatility implies higher risk. 
Writer
(option writer) (option seller) 
The investor who writes (or sells) an option. The option writer receives a premium from the buyer. Should there be an assignment, the writer has to fulfill their obligation to sell (in the case of a call option) or to buy (in the case of a put option) the underlying interest at the stated strike price. They can also buy back the option on the market until its expiry date before a possible assignment takes places. 
*Equivalent term in French
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