Module 1 Lesson 6 Flashcards
What is a Bid?
The price at which the option buyer wants to buy.
What is an Ask?
The price at which the option seller want to sell.
What is a Market Order?
An order to buy or sell at whatever price is available.
What is a limit Order?
An order to buy or sell at a specific price or better.
When you place a market order to Buy, you buy at the?
Ask price.
When you place a market order to sell, you sell at the?
Bid price.
In a limit order to buy, you’re putting up your own?
Bid price.
In a limit order to sell, you’re putting up your own?
Ask price.
What is Liquidity?
How fast and easy it is to buy and sell.
How do you measure Liquidity?
High volume + High open interest = Good liquidity.
What is volume?
The number of transactions that took place that day for a particular option.
What is open interest?
The total number of open positions in a particular option. Only increases when a new contract is created.
What is a physical settlement?
The underlying stock changes hands between the option buyer and the option seller when the option is exercised.
What is a cash settlement?
The resulting profit or loss that would have been realized in a physical settlement gets settled with cash instead.
