Giving You the Power of Options
ABOUT OICPRESSCONTACTRELATED LINKSOIC Simplified ChineseInstitutionalFinanacial Advisor

Options Glossary

Ratio spread
A term most commonly used to describe the purchase of an option(s), call or put, and the writing of a greater number of the same type of options that are out-of-the-money with respect to those purchased. All options involved have the same expiration date. For example, buying 5 XYZ May 60 calls and writing 6 XYZ May 65 calls. See also Ratio write
Ratio write
An investment strategy in which stock is purchased and call options are written on a greater than one-for-one basis; i.e., more calls written than the equivalent number of shares purchased. For example, buying 500 shares of XYZ stock, and writing 6 XYZ May 60 calls. See also Ratio spread
Realized gains and losses
The net amount received or paid when a closing transaction is made and matched together with an opening transaction.
Resistance
A term used in technical analysis to describe a price area at which rising prices are expected to stop or meet increased selling activity. This analysis is based on historic price behavior of the stock.
Reversal / reverse conversion
An investment strategy used by professional option traders in which a short put and long call with the same strike price and expiration are combined with short stock to lock in a nearly riskless profit. For example, selling short 100 shares of XYZ stock, buying 1 XYZ May 60 call, and writing 1 XYZ May 60 put at favorable prices. The process of executing these three-sided trades is sometimes called 'reversal arbitrage.' See also Conversion
RHO
A measure of the expected change in an option's theoretical value for a 1 percent change in interest rates.
Rolling
A trading action in which the trader simultaneously closes an open option position and creates a new option position at a different strike price, different expiration, or both. Variations of this include rolling up, rolling down, rolling out and diagonal rolling.
Questions? Confused? Have a question?
If you're having trouble grasping a concept or if this page doesn't answer a question, feel free to call 1-888-OPTIONS (between 7:30 a.m. - 5 p.m. CT), or email options@theocc.com to ask your question. You may also visit our Help Center for more information.