Glossary

Credit Default Option

See Also:

Default: Default is the failure to perform on a futures contract as required by exchange rules, such as a failure to meet a margin call or to make or take delivery.

Option: Option is a contract that gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or other instrument at a specific price within a specified period of time, regardless of the market price of that instrument. There are two types of options: Put Options and Call Options.

Call: There are three meaning of the "Call" term. It could be:
1) An option contract giving the buyer the right but not the obligation to purchase a commodity or other asset or to enter into a long futures position;
2) a period at the opening and the close of some futures markets in which the price for each futures contract is established by auction;
3) the requirement that a financial instrument be returned to the issuer prior to maturity, with principal and accrued interest paid off upon return.

Called: Called is another term for exercised when an option is a call. In the case of an option on a physical, the writer of a call must deliver the indicated underlying commodity when the option is exercised or called. In the case of an option on a futures contract, a futures position will be created that will require margin, unless the writer of the call has an offsetting position.

CIF: CIF is the cost, insurance, and freight paid to a point of destination and included in the price quoted.

Put: Put is an option contract that gives the holder the right but not the obligation to sell a specified quantity of a particular commodity or other interest at a given price (the "strike price") prior to or on a future date. Call options is another type of options.

Put Option: Put Option is an option which gives the buyer the right, but not the obligation, to sell the underlying futures contract at a particular price (strike or exercise price) on or before a particular date. Call options on futures gives right to buy underlying futures contracts at specific price on or before expiration date.

Reference Asset: Reference Asset is an asset, such as a corporate or sovereign debt instrument, that underlies a credit derivative.

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