Uncovered Options Trading System
Offer is an indication of willingness to sell futures contract at a given price. Offer is opposite of bid, the price level of the offer may be referred to as the ask.
Offset (also referred to as Liquidation, closing out and cover) is the liquidation of a purchase of futures contracts through the sale of an equal number of contracts of the same delivery month, or liquidating a short sale of futures through the purchase of an equal number of contracts of the same delivery month.
Omnibus Account is an account carried by one Futures Commission Merchant (FCM) with another FCM in which the transactions of two or more persons are combined and carried in the name of the originating FCM rather than of the individual customers; the opposite of Fully Disclosed. An originating broker must use an omnibus account to execute or clear trades for customers at a particular exchange where it does not have trading or clearing privileges.
On Track (or Track Country Station) is a type of deferred delivery in which the price is set f.o.b. seller's location, and the buyer agrees to pay freight costs to his destination. On Track (or Track Country Station) could refer to commodities loaded in railroad cars on tracks.
One Cancels the Other (OCO) Order is a pair of orders, typically limit orders, whereby if one order is filled, the other order will automatically be cancelled. For example, an OCO order might consist of an order to buy 10 calls with a strike price of 50 at a specified price or buy 20 calls with a strike price of 55 (with the same expiration date) at a specified price.
One-to-Many refers to a proprietary trading platform in which the platform operator posts bids and offers for commodities, derivatives, or other instruments and serves as a counterparty to every transaction executed on the platform. In contrast to many-to-many platforms, one-to-many platforms are not considered trading facilities under the Commodity Exchange Act.
Open is the period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the open."
Open Interest is the total number of futures or options contracts of a given commodity that have not yet been offset by an opposite futures or option transaction nor fulfilled by delivery of the commodity or option exercise. Open Interest is also called open contracts or open commitments. Each open transaction has a buyer and a seller, but for calculation of open interest, only one side of the contract is counted.
Open interest is the number of open contracts of a given option. An open contract is either put or call that is not exercised, closed or expired. Open interest increases when a buyer opens a put or call position and, vise versa, open interest decreases when a buyer sells/closes a put or call position.
Volume and open interest are important indicators in futures markets.
Open Order (or Orders) is an order that remains in force until it is canceled or until the futures contracts expire.
Open Outcry is a method of public auction for making bids and offers in the trading pits of futures exchanges. Open Outcry is common to most U.S. commodity exchanges, where trading occurs on a trading floor and traders may bid and offer simultaneously either for their own accounts or for the accounts of customers. Transactions may take place simultaneously at different places in the trading pit or ring. At most exchanges outside the U.S., open outcry has been replaced by electronic trading platforms.
Open Trade Equity is the unrealized gain or loss on open futures positions.
Opening is the period at the beginning of the trading session officially designated by the exchange during which all transactions are considered made "at the opening."
Opening Price (or Range) is the price (or price range) recorded during the period designated by the exchange as the official opening.
Opening Range is the range of prices at which buy and sell transactions took place during the opening of the market.
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.
Option Buyer is a person (trader) who buys calls, puts, or any combination of calls and puts purchaser of either a call or put option. Option buyers receive the right, but not the obligation, to assume a futures position. Option Buyer is also referred to as a Holder.
Option Contract is a contract which gives the buyer the right, but not the obligation, to buy or sell a specified quantity of a commodity or a futures contract at a specific price within a specified period of time. The seller of the option has the obligation to sell the commodity or futures contract or to buy it from the option buyer at the exercise price if the option is exercised.
Option Premium is the price a buyer pays (and a seller receives) for an option. Premiums are arrived at through the market process. There are two components in determining this price-extrinsic (or time) value and intrinsic value.
Option Pricing Model is a mathematical model used to calculate the theoretical value of an option. Inputs to option pricing models typically include the price of the underlying instrument, the option strike price, the time remaining till the expiration date, the volatility of the underlying instrument, and the risk-free interest rate (e.g., the Treasury bill interest rate). Examples of option pricing models include Black-Scholes and Cox-Ross-Rubinstein.
An option Seller (also referred to as Writer) is a person that sells options contracts. A trader that sells options without having an underlying assets is uncovered options seller (uncovered options writer). An options seller has obligations before an options buyer.
Option Writer is the person who originates an option contract by promising to perform a certain obligation in return for the price or premium of the option. Options writer is also known as option grantor or option seller.
Original Margin (also referred to as Initial Margin) is the initial deposit of margin money each clearing member firm is required to make according to clearing organization rules based upon positions carried, determined separately for customer and proprietary positions; similar in concept to the initial margin or security deposit required of customers by exchange rules.
Out Trade is a trade that cannot be cleared by a clearing organization because the trade data submitted by the two clearing members or two traders involved in the trade differs in some respect (e.g., price and/or quantity). In such cases, the two clearing members or traders involved must reconcile the discrepancy, if possible, and resubmit the trade for clearing. If an agreement cannot be reached by the two clearing members or traders involved, the dispute would be settled by an appropriate exchange committee.
Out-Of-The-Money option is an option that has no intrinsic value. For example, a call with a strike price of $400 on gold trading at $390 is out-of-the-money 10 dollars. Out-of-the-money put options are options with strike price above the current trading underlying assets' price. Out-of-the-money call options are options with strike price above the trading underlying assets' price.
Outright is an order to buy or sell only one specific type of futures contract; an order that is not a spread order.
Over-the-Counter (OTC) (Also referred to as Off-Exchange) is the way of trading commodities, contracts, or other instruments not listed on any exchange. OTC transactions can occur electronically or over the telephone.
Over-the-Counter Market (OTC) is a market where products such as stocks, foreign currencies and other cash items are bought and sold by telephone, Internet and other electronic means of communication rather than on a designated futures exchange.
Overbought is a technical opinion that the market price has risen too steeply and too fast in relation to underlying fundamental factors. Rank and file traders who were bullish and long have turned bearish.
Overnight Trade is a trade which is not liquidated during the same trading session during which it was established.
Oversold is a technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors; rank and file traders who were bearish and short have turned bullish.
Paper Profit or Loss is the profit or loss that would be realized if open contracts were liquidated as of a certain time or at a certain price. Paper Profit or Loss is usually referred to paper trading which means not real trading or virtual trading without indolent of real money with the purpose of training, education and testing.
Naked options trading is very risky - many people lose money trading them. It is recommended contacting your broker or investment professional to find out about trading risk and margin requirements before getting involved into trading uncovered options.