American Style Option: An option contract that can be exercised at any time between the date of purchase and the expiration date. Most exchange-traded options are American style.

Call Option: An option giving the buyer the right to purchase an underlying security at a fixed price (strike price) and within a specific period of time (expiry date).

Capped-Style Option: A capped option is an option with an established profit cap or cap price. The cap price is equal to the option's strike price plus a cap interval for a call option or the strike price minus a cap interval for a put option. A capped option is automatically exercised when the underlying security closes at or above (for a call) or at or below (for a put) the Option's cap price.

Writer: An investor who so sells an option is called the writer, regardless of whether the option is covered or uncovered.

Uncovered put option writing: A short put option position in which the writer does not have a corresponding short position in the underlying security or has not deposited, in a cash account, cash or cash equivalents equal to the exercise value of the put.

Uncovered Option: Uncovered Option is also known as a naked option - a written option is considered to be uncovered if the investor does not have an offsetting position in the underlying security. This is a much riskier strategy than a covered option.

Uncovered call option writing: A short call option position in which the writer does not own an equivalent position in the underlying security represented by his option contracts.

Type of options: The classification of an option contract as either a put or a call.

Treasury Bill/Option Strategy: (90/10 strategy) a method of investment in which one places approximately 90% of his funds in risk-free, interest-bearing assets such as Treasury bills, and buys options with the remainder of his assets.

Theoretical Option Pricing Model: The first widely-used model for option pricing. This formula can be used to calculate a theoretical value for an option using current stock prices, expected dividends, the option's strike price, expected interest rates, time to expiration and expected stock volatility. While the Black-Scholes model does not perfectly describe real-world options markets, it is still often used in the valuation and trading of options.

Short option position: The position of an option writer which represents an obligation on the part of the option's writer to meet the terms of the option if it is exercised by its owner. The writer can terminate this obligation by buying back (cover or close) the position with a closing purchase transaction.

Series of Options: Option contracts on the same class having the same strike price and expiration month. For example, all XYZ May 60 calls constitute a series.

Stock: A share of a company's stock translates into ownership of part the company.

Premium: The price of an option contract, determined in the competitive marketplace, which the buyer of the option pays to the option writer for the rights conveyed by the option contract. Often this word is used to mean the same as time value.

Physical Option: An option whose underlying security is a physical commodity that is not stock or futures. The physical commodity itself (a currency, treasury debt issue, commodity) - underlies that option contract.

Physical Delivery Option: An option whose underlying entity is a physical good or commodity, like a common stock or a foreign currency. When that option is exercised by its owner, there is delivery of that physical good or commodity from one brokerage or trading account to another.

Physical Delivery Option: An option whose underlying entity is a physical good or commodity, like a common stock or a foreign currency. When that option is exercised by its owner, there is delivery of that physical good or commodity from one brokerage or trading account to another.

Physical Delivery Option: An option whose underlying entity is a physical good or commodity, like a common stock or a foreign currency. When that option is exercised by its owner, there is delivery of that physical good or commodity from one brokerage or trading account to another.

OTC Option: An over-the-counter option is one which is traded in the over-the-counter market. OTC options are not listed on an options exchange and do not have standardized terms. These are to be distinguished from exchange-listed and traded equity options with NASD stocks as the underlying equity issue, which are standardized.

OTC Option: An over-the-counter option is one which is traded in the over-the-counter market. OTC options are not listed on an options exchange and do not have standardized terms. These are to be distinguished from exchange-listed and traded equity options with NASD stocks as the underlying equity issue, which are standardized.

Optionable stock: A stock on which listed options are traded.

Option Writer: The seller of either a call or put option. The seller is obligated to meet the terms of delivery if the option owner exercises his or her right. This seller has made an opening sale transaction, and has not yet closed that position.

Option Pricing Curve: A graphical representation of the estimated theoretical value of an option at one point in time, at various prices of the underlying stock. It reflects the amount of time value premium in the option for various stock prices, as well. The curve is generated by using a mathematical model. The delta (or hedge ratio) is the slope of a tangent line to the curve at a fixed stock price.

Option Premium: This is the price of an option.

Option Period: The time from when an option contract is created by a writer of that option to the expiration date; sometimes referred to as an option's 'lifetime.'

Option Holder: The buyer of either a call or put option.

Option Contract: A contract that represents the right, but not the obligation, to buy or sell a specified amount of an underlying security (stock, bond, futures contract, etc.) at a specified price within a specified time.

Option Contract: A contract that represents the right, but not the obligation, to buy or sell a specified amount of an underlying security (stock, bond, futures contract, etc.) at a specified price within a specified time.

Naked Uncovered option: A short option position that is not fully collateralized if notification of assignment is received. A short call position is uncovered if the writer does not have a long stock or long call position. A short put position is uncovered if the writer is not short stock or long another put.

Naked Option: An option written (sold) without an underlying hedge position.

Naked Option: An option written (sold) without an underlying hedge position.

Naked Option: An option written (sold) without an underlying hedge position.

Naked Option: An option written (sold) without an underlying hedge position.

Long Option Position: The position of an option purchaser (owner) which represents the right to either buy stock (in the case of a call) or to sell stock (in the case of a put) at a specified price (the strike price) at or before some date in the future (the expiration date). It results from an opening purchase transaction e.g., long call or long put.

Listed Option: A put or call option that is traded on a national options exchange. Listed options have fixed striking prices and expiration dates.  In contrast, over-the-counter options usually have non-standard or negotiated terms.

Index Option: An option whose underlying entity is an index. Most index options are cash-based. Index options allow investors to trade in a specific industry group or market without having to buy all the stocks individually.

In-the-Money option: An adjective used to describe an option with intrinsic value. A call option is in the money if the stock price is above the strike price. A put option is in the money if the stock price is below the strike price.

FLEX Options: Exchange traded equity or index options, where the investor can specify within certain limits, the terms of the options, such as exercise price, expiration date, exercise type, and settlement calculation.

Exchange: An area where an asset, option, future, stock or derivative is bought and sold.

European-Style Options: An option contract that may be exercised only during a specified period of time just prior to its expiration.

European Option: An option that can only be exercised on the expiration date.

Class of Options: A term referring to all options of the same security type - either calls or puts - covering the same underlying security.

Class of Options: A term referring to all options of the same security type - either calls or puts - covering the same underlying security.