Definitions

Diagonal Spread

A Diagonal Spread is an option spread where the trader buys a longer-term option and sells a near-term option. The inverse could also be considered a diagonal spread, however, the longer-term option is margined as...

Avatar Peter Stolcers
January 4, 2009
5

Synthetic Put

Option traders often construct synthetic put positions to hedge their short stock positions. When you are short stock, your risk is theoretically limitless. Consequently, option traders buy calls to protect the position from a large...

Avatar Peter Stolcers
January 3, 2009
5

Synthetic Call Option

In a Synthetic Call Option, the investor can create a pseudo call position by buying puts that equal the number of shares they own. Just like a call buyer can buy in-the-money, at-the-money, out-of-the-money options,...

Avatar Peter Stolcers
January 3, 2009
5

Married Puts

In a married puts option strategy, the investor owns shares of stock and purchases an equal number of put options. Once the stock rises by more than the purchase price of the put option, the...

Avatar Peter Stolcers
January 3, 2009
4

4-Way Option Spread

A 4-Way Option Spread is the same as an iron condor spread. The option strategy sells an out of the money put spread and an out of the money call spread at the same time....

Avatar Peter Stolcers
January 2, 2009
4

Butterfly Spread

In a Butterfly Spreadstrategy, all of the expiration months are the same. A trader buys a call with a low strike price, sells two calls at the next strike and finally buys a call above...

Avatar Peter Stolcers
January 2, 2009
4

Iron Condor Spread

An iron condor is typically a non-directional option spread where the trader sells an out of the money call spread and an out of the money put spread ("the wings") in an effort to collect...

Avatar Peter Stolcers
January 2, 2009
7

Option Spread

An option spread is created when a trader simultaneously buys and sells options with different strike prices and/or expiration months. A vast variety of strategies can shape the risk and reward of the trade. Simple...

Avatar Peter Stolcers
January 2, 2009
4

Accelerated Time Decay

Accelerated Time Decay refers to options that have less than a month to maturity decay at an accelerated rate. As time passes, the probability of the stock making a major move decreases. A stock has...

Avatar Peter Stolcers
January 2, 2009
3

Time Premium Decay

Stock options are a wasting asset. From the day you purchase them, their value goes down if the stock stays flat. This is called the Time Premium Decay. Out of the money options are 100%...

Avatar Peter Stolcers
January 2, 2009
5
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