AdjustmentsA change to contract terms due to a corporate action (e.g., a merger or stock split). Depending on the corporate action, different contract terms (including strike price, deliverable, expiration date, multiplier etc.) could be adjusted. An adjusted option may cover more or less than the usual 100 shares. For example, after a 3-for-2 stock split, the adjusted option will represent 150 shares. For such options, the premium must be multiplied by a corresponding factor. Example: buying 1 call (covering 150 shares) at 4 would cost $600.
All-or-none order (AON)A type of option order which requires that the order be executed completely or not at all. An AON order may be either a
day order or a
GTC (good-‘til-cancelled) orderAmerican-style optionAn option that can be exercised at any time prior to its expiration date. See also
European-style optionArbitrageA trading technique that involves the simultaneous purchase and sale of identical assets or equivalent assets in two different markets with the intent of profiting by the price discrepancy.
Ask / Ask priceThe price at which a seller is offering to sell an option or a stock. See also
AssignmentAssigned (an exercise)Received notification of an assignment by OCC. See also
AssignmentAssignmentNotification by OCC to a clearing member that an owner of an option has exercised their rights. For equity and index options, OCC makes assignments on a random basis. See also
Delivery and
ExerciseAt-the-money / At-the-money optionA term that describes an option with a strike price that is equal to the current market price of the underlying stock.
Averaging downBuying more of a stock or an option at a lower price than the original purchase to reduce the average cost.