Unit 8, 9 Flashcards
OEX
S&P 100 index
SPX
S&P 500 index
MMI
Major market index
mimics the Dow Jones 30 industrial average
VIX
Volatility market index
Fear gauge or fear index
Volatility of the S&P 500 index options traded on the CBOE
Broad-based indexes
Reflect movement of the entire market
Narrow-based indexes
Track the movement of market segments in a specific industry such as technology or pharmaceuticals
FCO
Foreign currency options
XDN, Japanese, 1 million contract size
Otherwise, XD_, 10,000 unit contact
LEAPS
Long-term Equity Anticipation Securities (LEAPS) are a type of stock or index option with notably longer expiration dates as compared to standard options.
The only way an option could generate a long-term cap gain
While most traditional options expire within 9 months, LEAPS options can have expirations that extend up to two or three years from the time they’re issued.
ROP
Registered options principal
Open interest
The number of contracts outstanding
The higher the open interest, the more liquid the option
Declines when moving toward expiration
Put-Call Ratio
Number of traded put options
/ divided by
Number of traded call options
Higher ratio, more bearish
Can also be a contrarian indicator
p239
Classification of spreads
Vertical, price, dollar
Horizontal, calendar, time
Diagonal
Debit spread, profit if the premiums
Widen, or exercise both options
Credit spread, profit if the premiums
(6 letters)
Narrow, or expire both options
AIR
Assumed interest rate
The annual rate of return required to maintain the level of annuity payments
A conservative projection of the performance of the separate account over the estimated life of the contract
Used to calculate the death benefit of variable life insurance
Cash value calculated daily, and reported monthly
