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15 Cards in this Set

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  • Back
Historical volitility
A measurement of the price movement of the underlying stock during a 12-month period. It helps project the magnitude of future price fluctuations.
Represents the theoretical value on an option based on the Black-Scholes formula. (blue book value)
Compares the price change of an option with the price change of its underlying stock. (range of .0-1)
Compares the rate of change of delta with the rate of change in the price of underlying stock. (a gamma of .05 indicates that for every $1 the stock moves, the delta will inc. or dec. by $.05
compare the rate of time decay with the passing of each calendar day.
Implied Volatility
How much the stock is expected to move during the life of the option.
Selling Puts
Bearish strategy that involves creating a naked put option. Seller of put contract obligated to purchase shares of stock at predetermined price if the buyer of the contract chooses to exercise the contract.
Bull Put Spread
a credit spread that allows you to make money on uptrending stocks
Bear call Spread
a credit spread that allows you to make money on downtrending stocks
Credit Spread
Selling a higher priced option while simultaneously buying a lower priced option, creating credit in your account
Return on Investment
(maximum potential profit divided by maximum potential loss)
Bull Call Spread
Buying a call option on a bullish stock (strike price lower than the current price of the stock)while simultaneously selling a call option on a bullish stock (strike price higher than the current price of the stock)
Bear Put Spread
buying a put option on a bearish stock (strike price higher than stike price of the put in next stop), and then selling a put option (stike price lower that current trading price of stock.
Dialgonal Spread
An option position where you purchase a high-priced opton (long side), and sell a
lower-priced option (short side)with a different expiration date to off set some of the costs of entering the long option position
diagonal bull spread
buying a long term call option (strike price lower than current stock price, while selling a shorter term call option (strke price higher than strike price purchased in step 1.