1. The practice of selling large amounts of a commodity or security close to the options expiry date in order to prevent a rise in market price. 2. An attempt to keep a stock's price low or move its price lower by putting selling pressure on it. 1. The investor who might practice capping is a call option writer. If practicing capping, he or she is trying to avoid having to transfer the underlying security or commodity to the option holder. The goal is to have the option expire worthless so that the premium initially received by the writer is protected. 2. This is a violation of NASD rules.
1. The period of time between the opening and closing of some future markets wherein the prices are established through an auction process.2. An option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time. Watch: Call Options 1. In some exchanges, the call period is an important time in which to match and execute a large number of orders before opening and closing. 2. A call becomes more valuable as the price of the underlying asset (stock) appreciates.
An options trading strategy that is generally achieved by purchasing one call option and selling two other call options at different strike prices. When drawn structurally, the strike price of the long option is located below the two successively higher written calls and loosely resembles a Christmas tree. This strategy is used when an investor believes a stock is going to make a move higher. It is a variation of the ratio spread, so a significant upward move in the stock price will result in a very large loss due to the extra short call. The staggered strike prices for the written calls in the Christmas tree strategy reduce the amount of loss incurred when the share price rises more than expected, unlike the ratio spread, where the call options have the same strike.
A volatility index on the Chicago Board Options Exchange, known by its ticker symbol VXN. The VXN is a measure of implied volatility for the Nasdaq 100 (NDX). The VXN is calculated using the same methodology as the VIX. The VXN represents the implied volatility of a hypothetical 30-day option that is at the money.
Founded in 1973, the CBOE is an exchange that focuses on options contracts for individual equities, indexes and interest rates. The CBOE is the world's largest options market. It captures a majority of the options traded. It is also a market leader in developing new financial products and technological innovation, particularly with electronic trading.The CBOE is also referred to as the "See-bo". On the first day of trading in 1973, 911 contracts traded hands on 16 stocks. Today, the CBOE's average daily volume consistently exceeds one million contracts per day.
A commodity exchange established in 1848 that today trades in both agricultural and financial contracts. The CBOT originally traded only agricultural commodities such as wheat, corn and soybeans. Now, the CBOT offers options and futures contracts on a wide range of products including gold, silver, U.S. Treasury bonds and energy. The CBOT has added electronic trading of futures contracts in recent years, but for decades was an open auction market, where traders meet in a trading pit and primarily use hand signals to execute trades.On October 18th, 2005, the Chicago Board of Trade transformed from a non-profit organization to a for-profit organization with an initial public offering on the NYSE, listed as CBOT Holdings Inc. Its ticker symbol is "BOT".
The rate at which the delta of an option or warrant will change over time. Charm refers to the second order derivative of an option's value - once to time and once to the price. It is also the derivative of theta, which measures the time decay of an option's value. This value decreases as the option approaches maturity. Charm is used by investors who employ a delta-hedging option trading strategy, and provides the investor with information on the delta of an option on a per-year basis. As the number of days left on the options contract gets smaller and smaller, charm becomes more volatile and less accurate.
The name given to a clearing member that is willing to assume the opposite position of a futures contract within a larger alternative exchange, of which it also is a clearing member. A changer commonly refers to clearing members of the CME who provide liquidity by taking the opposite futures positions on larger alternative exchanges. As changers must bear the risks associated with entering into the opposite futures transaction, they charge a fee for their services.
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