Glossary

Question 1

Ask Price

Answer 1

This is the current asking price in which a security or option on a security. If you one wants to enter a trade immediately it’s best to use the ask price.

Question 2

At The Money

Answer 2

This refers to the strike price of an option where it is equal to the current prices of the underlying stock price. As an example, the stock is trading at $75, and you buy an option that has a strike price of $75.

Question 3

Bearish

Answer 3

This term refers to our overall market and/or individual underlying stock sentiment when we feel the market is heading or trending down.

Question 4

Bid Price

Answer 4

This is the current price in which we can sell an underlying security or option. When exiting a trade, you’ll typically place a market order, which allows you to get out of the trade quickly at or near the bid price.

Question 5

Bullish

Answer 5

This term refers to our overall market and/or individual underlying stock sentiment when we feel the market is heading or trending up.

Question 6

Call

Answer 6

This is an option contract that will give us the right and NOT the obligation to buy a specified number of shares at a specified price (1 contract = 100 shares) on or before a specified date (expiration date).

Question 7

Channel

Answer 7

This is a term that we use when it comes to our technical analysis to describe an area in which the stock fluctuates. This is done between clear resistance and support over time. The longer something is in a channel, the stronger the breakout of the channel (up or down) typically is.

Question 8

Daily Price Bar

Answer 8

This term is used to refer to the daily price, and it’s corresponding representation on the chart. It contains the opening price, intraday low, intraday high and the closing price.

Question 9

Expiration

Answer 9

Every option contract that we purchase has a certain expiration date. If an option contract expires, it will expire worthless. Remember as part of our trading rules this should never happen as we will always exit our position at least 30 days before option expiration.

Question 10

In The Money

Answer 10

This refers to call options in which the strike price where the price is currently less than the underlying stock. For example, if the stock is trading at $80 and we buy an options contract with a strike price of $75 this would represent our option being $5 In-The-Money.

Question 11

Intrinsic Value

Answer 11

We use intrinsic value when talking about our options contract. It pertains to the amount of money that a call option is In-The-Money. For example, if the stock is trading at $80 and we buy an options contract with a strike price of $75 this would represent our option being $5 In-The-Money. That means it has $5 of intrinsic value.

Question 12

Long

Answer 12

This is a term that we use when we are expecting a stock or call option to go up in value.

Question 13

MACD

Answer 13

This is an indicator that we use on our technical analysis charts to help determine the story a chart is telling us. It stands for Moving Average Convergence Divergence and you can watch this video to learn more about the MACD itself.

Question 14

Moving Average

Answer 14

This is an indicator designed to help us determine the market and individual underlying stock market strength or weakness. The calculation works by adding the prices for a certain number of days (we use 7 and 30) and dividing that by the total number of days used.

Question 15

Option

Answer 15

Simply put an option is a contract that gives us the right but not the obligation to buy or sell a particular security at a specified price on or before a certain date specified.

Question 16

Options Chain

Answer 16

This refers to the section in which we can view all the details related to an underlying stock’s available options, bid and ask prices, open interest, volume, etc.

Question 17

Out of The Money

Answer 17

This term is used to refer to a call option where the strike priced is higher than the current price of the underlying stock. For example, the stock price is $50, and you purchase an options contract that has a $52.5 strike price. This would be out of the money by $2.5.

If you are using a put option (wanting the stock to go down), an Out-of-the-Money option is going to be one in which the strike prices are below the current market price of an underlying stock.

Question 18

Put

Answer 18

Stated simply a put is an option contract where we have the right, but not the obligation to SELL a specified number of shares of a specific security and a predetermined price on or before a certain date specified in advance.

Question 19

Resistance

Answer 19

This can be defined by an area in where an underlying stock tends to struggle to surpass. This is due to selling, however, if a stock does overtake resistance that resistance will now become support for the underlying stock.

Question 20

Reverse Trouble Tom

Answer 20

Rather than type out a lengthy explanation that may be challenging to understand I’ve created a full video walkthrough including examples of good and bad reverse troubled tom’s (RTT) in the FAQ section.

Question 21

Roller

Answer 21

Also, know as a rolling stock is used to define an underlying stock that tends to fluctuate in price through certain levels over the course of time. One can imagine it looking a bit like a roller coaster track full of ups and downs.

Question 22

Short

Answer 22

This can be defined and referred to when someone is aiming for the underlying security to decrease in value.

Question 23

Spread

Answer 23

For our purposes, this will refer to the difference in prices between the Bid and the Ask prices. We aim to keep this number to 10% or less.

Question 24

Strike Price

Answer 24

The strike price refers to the price in which an underlying security be executed with should someone exercise their option. A strike price can be In-The-Money, At-the-Money, or Out-of-The-Money.

Question 25

Support

Answer 25

This can be defined by an area in where an underlying stock tends to stay above when selling is taking place. Think of it like a floor that is supporting the stock. If an underlying stock’s price falls below support, the support will now become resistance.

Question 26

Ticker Symbol

Answer 26

A ticker symbol is just the abbreviation that is used to identify a particular company. For instance, Apple has a ticker symbol of AAPL.

Question 27

Trend

Answer 27

Is the overall direction of a market or underlying stock. Typically defined by one of three trends; up, down, flat, and (neutral).

Question 28

Trend Line

Answer 28

Simply put a trend line is a line that is drawn on a specific chart that will be used to display the direction it is moving. For our purposes, it applies to underlying stocks and the indexes.

Question 29

Trouble Tom

Answer 29

Rather than type out a lengthy explanation that may be challenging to understand I’ve created a full video walkthrough including examples of good and bad troubled tom’s (TT) in the FAQ section.

Question 30

UNCH

Answer 30

Sometimes when you view a chart in the charting software we use you’ll see the symbol UNCH where the price is. What this refers to is that the price is unchanged for the day meaning that the price closed at the same price that it closed the trading session before.

Question 31

Volatility

Answer 31

This refers to the fluctuation of an underlying stock or the broader market. More volatility will mean more movement, and it can be referred to over different periods of time, such as daily.

Question 32

Volume+

Answer 32

This is an indicator that we use to better understand the story being played out on an underlying stock’s chart.

Question 33

Williams %R

Answer 33

This is an indicator that we use to better understand the story being played out on an underlying stock’s chart and is specifically helpful with a trend continuation (TC).