An employee stock option that grants additional options upon exercise of the original. The employee satisfies the exercise price of their current option with shares rather than cash. The reload option will have the same expiry date as the original option, however, the strike price will be equal to the share price at the time the original option is exercised. Also known as restoration option.
An individual working on the floor of an exchange whose function it is to watch a number of options traded on the exchange to ensure that they are being traded fairly, in fair market conditions. The individual may trade for him/herself or for other parties, but is under no obligation to 'make a market' for any options traded on the exchange. A registered options trader is a specialist dealing in options, but he or she does not necessarily perform the function of a market maker.
An employee at a brokerage firm that is responsible for supervising options' exposure and the trading activities on options within client accounts. The ROP acts between the client making the order and the exchange member who executes the order. In a brokerage firm there is often more than one ROP. In some cases, one is the designated ROP, while another is the alternate ROP. The alternate ROP acts as a subordinate to the designated ROP. Both positions are often taken by senior employees, more specifically either a partner, officer, or director of the firm.In the United States, an individual wishing to become a ROP must take and pass the Series 4 securities license course provided by the National Association of Securities Dealers. In Canada, a potential ROP must pass the The Options Supervisors Course provided by the Canadian Securities Institute.
A barrier option that offers a predetermined rebate, should the option be 'knocked-out.' Should a rebate be enacted, it will be deducted from the premium paid to the issuer, thus reducing the issuer's potential profit. For this reason, it is uncommon to see a rebate opportunity attached to a barrier option.
An options strategy in which an investor simultaneously holds an unequal number of long and short positions. A commonly used ratio is two short options for every option purchased. A ratio spread would be achieved by purchasing one call option with a strike price of $45 and writing two call options with a strike price of $50. This would allow the investor to capture a gain on a small upward move in the underlying stock's price. However, any move past the higher strike price ($50) of the written options will cause this position to lose value. Theoretically, an extremely large increase in the underlying stock's price can cause an unlimited loss to the investor due to the extra short call.
The rate at which the price of a derivative changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option or options portfolio to a change in interest rate. For example, if an option or options portfolio has a rho of 12.124, then for every percentage-point increase in interest rates, the value of the option increases 12.124%.
A new swap that undoes the effects of an existing swap (a type of derivative that involves the exchange of cash flow streams). A reverse swap is one of several ways to undo a swap. Other options for undoing a swap are completing a cash settlement based on market value, selling the swap (with permission from the other party) and using a swaption. One reason why a reverse swap would be used instead of simply canceling the original swap is to avoid negative tax or accounting implications. Swaps are private transactions that are traded over the counter and as such are subject to credit risk. These contracts exchange assets, liabilities, currencies, securities, equity participations and commodities. They are generally used for risk management by institutions and are less common among individual investors. Reverse swaps allow investors to mitigate the original risk that they are exposed to upon entering a swap, or to cancel a position if they feel that market conditions will change in such a way as to give the original swap a negative value.
1. The move from one option position to another with a higher exercise price. 2. In the context of venture capital, when a VC forces small companies to merge in order to reduce costs. 1. When investors are bullish on a stock they will typically roll up.
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