Glossary

Bear Call Spread

A Bear Call Spread, also known as a Short Call Spread or Call Credit Spread, is an options strategy that profits when the underlying asset's price declines or remains below the short call's strike price.

Bull Calendar Spread

A bull calendar spread is an options trading strategy that involves buying and selling call options with the same strike price but different expiration dates, where the longer-dated option is purchased, and the shorter-dated option is sold.

Call Option

A call option is a financial contract that gives the buyer the right, but not the obligation, to buy an underlying asset such as a stock or index at a fixed price before a specified expiry date. Traders usually buy call options when they expect the price of the asset to rise.

Delta Neutral

Delta neutral is a portfolio or trading strategy where the overall delta of the position is zero, meaning the portfolio's value does not change with small movements in the underlying asset's price.

Exposure Margin

Exposure margin is a type of margin that brokers charge to help protect against market fluctuations and potential losses in futures and options (F&O) trading. It is often referred to as an additional margin.

Long Put

A long put is when a trader buys a put option, expecting a stock’s price to fall. It can be used to make a profit if the price drops or to protect existing investments from losses.

Option Buying

Option buying is a trading strategy where an investor pays a premium to purchase call or put options, giving them the right but not the obligation to buy or sell an underlying asset at a predetermined price before a certain date specified by the exchange.

Option Margin

Margin in options is the capital a trader must maintain in their account when entering into certain options trades, especially when writing (selling) options.

Option Settlement

Option settlement is the process of finalising an options contract when it expires or is exercised. It can be a cash settlement, where money is paid for profit or loss, or a physical settlement, where the actual asset is given.

Option Writing

Option writing, also known as option selling, is the process of selling a call or put option, where the writer (seller) must fulfil the terms of the contract if the buyer exercises the option.

Options

An option is a type of derivative contract that gives the holder the right, but not the obligation, to buy or sell an underlying asset at a predetermined price before a specified date. Options are primarily used for hedging to mitigate risks and for speculation to seek potential profits.

Options Expiry

Options expiry is the date on which an option contract that is bought or sold becomes invalid. Profit and loss are settled based on the agreement between both parties regarding options.

Put Option

A put option is a financial contract that gives the holder the right, but not the obligation, to sell an underlying asset (such as a stock) at a predetermined price (strike price) before or on a specific expiration date. A put option is widely used for speculation as well as hedging purposes.

Short Put

A short put means the trader sells a put option contract and receives a premium. This strategy is used when the trader expects the stock price to stay the same or go up. If the price stays above the strike price, the trader keeps the premium as profit.

Strike Price in Options

The strike price is the fixed price at which you can buy or sell the underlying asset if you choose to exercise the option.

Swaptions

A swaption (swap option) is a financial derivative that grants the holder the right, but not the obligation, to enter into an interest rate swap agreement at a specified future date.