Glossary BT Option

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- American-style option- The option that is possible to be exercised anytime, during the exercise period, Such as Nikkei 225 Option.

⇔ European type: Possible to be exercised only on the date of expiry. - At-the-money- The options strike price and the underlying assets current price is the same. The options max time value.
- Binary options- An option is valued, if the underlying asset reaches a specific price. If it does not reach the specific price, it will be valueless.

Cash-or-nothing：If in-the-money on expiry day, it will have value or if it is out-of-the-money, it will be valueless.

Asset-or-nothing：If In-the-money on expiry day, it will be the same value as the underlying asset. If out-of-the-money or at-the-money, it is valueless. - Black-Scholes formula- The model for calculating the option pricing that was applied by Fisher Black and Myron Scholes in 1973. This is a widely used model for option pricing.
- Call Option- An option contract that gives the owner the right, (but not the obligation to buy the underlying security) at a specified price (its strike price) for a certain, fixed period (until its expiration).
- Closing an Option (offsetting a position)- To settle the rights possessed before the expiry.
- Covered Option- The selling of an option while possessing the underlying asset to cover for the existing sold position of an option.

In a situation possessing a bought position of an underlying asset, the selling of a Call option is called a “covered call” and for selling a Put option while possessing a sold position of an underlying asset, is called a “covered put”. - Currency Option- It is a trade of selling and buying the right of a currency. Buying the right of the currency is called a Call, selling the right of the currency is called a Put.
- Derivatives- A financial security in which the value is determined in part from the value and characteristics of another security known as the underlying security. Ex. Futures contract, Option and SWAP.
- European-style option- An option that could be exercised only on the expiry day.

⇔American-style options：An option that can be exercised at any time prior to its expiration date. Nikkei 225 is one example. - Exercise- When the method of buying an option is actually based on the option agreement where the trade is performed by the strike price.
- Exercise day (Exercise period)- The day (or period) the buyer of the option could exercise.
- Expiry rate- The rate of the option, at the expiry time. The expiry rate is compared with the strike price to verify whether it meets the requirement for the payout.
- Expiry time- The time when the bought option is automatically exercised. The payout is decided by the rate at the expiry time.
- Foreign currency option- The trade of the buying and selling the right of foreign exchange The right of buying the currency is called a Call, the selling of the right is called a Put.
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- Historical volatility- The value calculated from the options past floating price rate of the underlying asset price. The option price’s (premium) logical value can be calculated based from the Historical Volatility and other factors (underlying asset price, strike price, days until the expiry rate, interest rate). For the method of calculating the logical value of the Premium, there is the Black-Scholes formula, which is widely used.
- In-the-money- An option with the “intrinsic value”. If Call (buying of the right of a stock), the current price of the underlying asset – strike price>0. If Put (selling of the right of a stock), the strike price – the current price of the underlying asset >0.
- Intrinsic Value- The in-the-money portion of an option's premium. In the case of Call option, underlying asset price−strike price＝intrinsic value. In the case of Put option, strike price–underlying asset price=intrinsic value.
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- Left time until closing of trade- The time left for investing on an option. The closing of an option (offsetting the position) can be performed until this time.
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- Number of options purchased- The number of options invested on.
- Option- The trade of buying and selling of the right of a financial product (exchange, stocks, bond) that could be sold and bought, at a specific price on a fixed date in the future or in a certain period of time. The right of buying: Call Option, the right of selling: Put Option. The person buying: Buyer, The person selling: Writer.
- Option premium- The value of an option.
- Out of the money- This is about an option without the “intrinsic value”. If Call (buying of the right of a stock), the current price of the underlying asset – strike price<0. If Put (selling of the right of a stock), strike price – the current price of the underlying asset <0.
- Pay-out- The amount that is received in the case your prediction was a hit at the expiry time.
- Pay-out rate- In the case the trader predicts correctly, this is the promised percentage added on to the investment amount as a return.
- Premium- The price used to invest and settle an option. This is the amount subtracted from the balance at the time of investing on an option. This amount will be added to the balance at the time of settlement. (Total price of an option: intrinsic value plus time value, also called as time value). If Put (selling of the right of a stock), strike price – the current price of the underlying asset <0.
- Price of underlying asset- The value or price of an underlying asset.
- Put Option- An option contract that gives the owner the right to sell the underlying stock at a specified price (its strike price) for a certain, fixed period (until its expiration).
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- Strike price- The price of an option when it is exercised. The price at which the owner of an option can purchase (call) or sell (put) the underlying stock. Used interchangeably with striking price or exercise price.
- Time value- The option value derived from the expectation in the fluctuation of price in the future of the underlying asset. The part of an option's total price that exceeds its intrinsic value.
- Underlying asset- Assets that are subject to rights such as Derivatives and Options.
- Validity period- The period the option could be bought. The option is no longer available after this period.
- Volatility- The stock price fluctuation. It is the standard deviation of a stock's daily price changes. There are Historical volatility（the statistical price fluctuation）and Implied volatility (predicted price fluctuation).
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