50 commonly used options terms and their English-Chinese translations with brief explanations:
• Option
• A contract that gives the buyer the right, but not the obligation, to buy or sell an asset at a specified price within a specified time.
• Call Option
• Grants the holder the right to purchase the underlying asset at the strike price before expiration.
• Put Option
• Grants the holder the right to sell the underlying asset at the strike price before expiration.
• Exercise Price/Strike Price
• The price of the underlying asset specified in the option contract.
• Expiration Date
• The last date on which the option contract expires.
• Intrinsic Value
• The difference between the exercise price of an option and the market price of the underlying asset.
• Time Value
• The portion of the option price that exceeds its intrinsic value, reflecting the potential for price movement of the underlying asset before expiration.
• Implied Volatility
• The market's expected volatility of the underlying asset, inferred from option prices.
• Expected Volatility
• Prediction of future volatility of the underlying asset based on historical data and market sentiment.
• Volatility
• An indicator measuring the magnitude of price movements of the underlying asset.
• Covered Call
• Selling call options while holding the underlying asset.
• Naked Short Selling
• Selling put options on the underlying asset without holding or borrowing it.
• Risk-Free Interest Rate
• Yield on investments theoretically without default risk (e.g., government bonds).
• Cash Settlement
• Cash settlement of the price difference at the expiration of the options, without physical delivery of the underlying asset.
• Position Limit
• Restrictions on the number of positions held by the investor.
• Strike Price Interval
• The difference between two adjacent strike prices of option contracts based on the same underlying asset.
• Breakeven Point
• The price of the underlying security when the investor's returns from the options investment are zero.
• Limited Loss
• The maximum loss for the option buyer is limited to the premium paid.
• Conversion Arbitrage
• A risk-free arbitrage strategy involving the purchase of the underlying asset, buying put options, and selling call options.
• Vertical Spread
• Buying one option while selling another option with the same underlying asset and expiration date but different strike prices.
• Ratio Spread
• Buying a certain number of options while selling more options with the same underlying asset and expiration date but different strike prices.
• Strap
• Buying two call options while buying one put option with the same strike price and expiration date.
• Butterfly Spread
• A composite arbitrage strategy that includes both long and short butterfly spread strategies.
• Long Butterfly Spread
• Buying one call option at a lower strike price and one call option at a higher strike price while selling two call options with strike prices between the two.
• Box Spread
• A strategy that combines bull spread and bear spread strategies.
• Short Butterfly Spread
• Selling one call option at a lower strike price and one call option at a higher strike price while buying two call options with strike prices between the two.
• Calendar Spread
• Selling a call option with an earlier expiration date while buying a call option with the same strike price but a later expiration date.
• Straddle
• Buying one call option while simultaneously buying one put option with the same strike price and expiration date.
• Strangle
• Buying one call option while also buying one put option with the same expiration date but different strike prices.
• Bull Spread
• Buying one option while simultaneously selling another option on the same underlying asset with the same expiration date but a higher strike price.
• Bull Call Spread
• Buying a call option at a lower strike price while selling one call option at a higher strike price on the same underlying asset with the same expiration date.
• Bull Put Spread
• Buying a put option at a lower strike price while selling a put option at a higher strike price on the same underlying asset with the same expiration date.
• Bear Spread
• Buying one option while simultaneously selling another option on the same underlying asset with the same expiration date but a lower strike price.
• Bear Call Spread
• Buying a call option at a higher strike price while selling a call option at a lower strike price on the same underlying asset with the same expiration date.
• Bear Put Spread
• Buying a put option at a higher strike price while selling a put option at a lower strike price on the same underlying asset with the same expiration date.
• Strip
• Buying one call option while buying two put options with the same strike price and expiration date.
• Condor
• Selling (buying) two options at different strike prices while simultaneously buying (selling) options at lower and higher strike prices.
• Maintenance Margin
• Funds secured in the margin account to ensure contract performance.
• Naked Option
• Short position in options where the seller does not hold the underlying contract.
• Cash or Physical Settlement
• The method of settlement at the expiration of options, which can be cash payment of the price difference or physical delivery.
• Limit Order
• Orders executed at the specified price or better.
• Market Order
• An order executed immediately at the current market price.
• Stop Order
• Orders executed when the market price reaches a specified level.
• Market If Touched Order (MIT)
• Orders that become market orders when market prices reach specified levels.
• Good-till-Cancelled Order
• Orders that remain valid until executed.
• Spread Order
• Orders to simultaneously buy and sell two related contracts.
• Cancel Order
• Instruction to cancel unexecuted orders.
• Settlement Price
• The official price used for option settlement.
• Physical Delivery
• Physical delivery of assets at the expiration of the options.
• Hedging
• The practice of reducing the risk of price changes in the underlying asset by buying and selling options.