Backspread
A Delta-neutral spread composed of more long options than short options on the same underlying instrument. This position generally profits from a large movement in either direction in the underlying instrument.
BATS
Cboe Bats BZX Options Exchange
Bear (or bearish) spread
One of a variety of strategies involving two or more options (or options combined with a position in the underlying stock) that can potentially profit from a fall in the price of the underlying stock.
Bear spread (call)
The simultaneous writing of one call option with a lower strike price and the purchase of another call option with a higher strike price. Example: writing 1 XYZ May 60 call and buying 1 XYZ May 65 call.
Bear spread (put)
The simultaneous purchase of one put option with a higher strike price and the writing of another put option with a lower strike price. Example: buying 1 XYZ May 60 put and writing 1 XYZ May 55 put.
Bearish
An adjective describing the opinion that a stock, or a market in general, will decline in price; a negative or pessimistic outlook.
Beta
A measure of how closely the movement of an individual stock tracks the movement of the entire stock market.
Bid / Bid Price
The price at which a buyer is willing to buy an option or a stock.
Black-Scholes formula
The first widely used model for option pricing. This formula is 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 often used in the valuation and trading of options.
BOX
BOX Options Exchange
Box spread
A four-sided option spread that involves a long call and a short put at one strike price in addition to a short call and a long put at another strike price. Example: buying 1 XYZ May 60 call and writing 1 XYZ May 65 call; simultaneously buying 1 XYZ May 65 put and writing 1 May 60 put.
Break-even point(s)
The stock price(s) at which an option strategy results in neither a profit nor a loss. While a strategy's break-even point(s) are normally stated as of the option's expiration date, a theoretical option pricing model can be used to determine the strategy's break-even point(s) for other dates as well.
Broker
A person acting as an agent for making securities transactions. An account executive or a broker at a brokerage firm who deals directly with customers. A floor broker on the trading floor of an exchange actually executes someone else's trading orders.
Bull (or bullish) spread
One of a variety of strategies involving two or more options (or options combined with an underlying stock position) that may potentially profit from a rise in the price of the underlying stock.
Bull spread (call)
The simultaneous purchase of one call option with a lower strike price and the writing of another call option with a higher strike price. Example: buying 1 XYZ May 60 call and writing 1 XYZ May 65 call.
Bull spread (put)
The simultaneous writing of one put option with a higher strike price and the purchase of another put option with a lower strike price. Example: writing 1 XYZ May 60 put, and buying 1 XYZ May 55 put.
Bullish
An adjective describing the opinion that a stock, or the market in general, will rise in price; a positive or optimistic outlook.
Butterfly spread
A strategy involving three strike prices with both limited risk and limited profit potential. Establish a long call butterfly by buying one call at the lowest strike price, writing two calls at the middle strike price and buying one call at the highest strike price. Establish a long put butterfly by buying one put at the highest strike price, writing two puts at the middle strike price and buying one put at the lowest strike price. For example, a long call butterfly might include buying 1 XYZ May 55 call, writing 2 XYZ May 60 calls and buying 1 XYZ May 65 call.
Buy-write
A covered call position that includes a stock purchase and an equivalent number of calls written at the same time. This position may be a combined order with both sides (buying stock and writing calls) executed simultaneously. Example: buying 500 shares XYZ stock and writing 5 XYZ May 60 calls. See also Covered call / Covered call writing

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