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Essential Option Strategies by J. Kinahan

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Glossary

American-style option
A put or call options contract that can be exercised at any time prior to expiration. Stock options, options on exchange-traded funds (ETFs), and some index options settle American-style.
arbitrage
Buying (or selling) a security in one market or on one exchange and selling (or buying) it on another where a temporary difference in price exists. Arbitrage is an attempt to score a risk-free profit.
ask
The best price that a security or commodity is offered for sale.
assignment
When an option seller or writer receives an exercise notice, assignment has occurred. When assigned, writers must deliver the underlying (shares or cash) per the terms of the contract.
at-the-money (ATM) option
When the strike price of the option and the market price of the underlying stock are the same, the contract is at the money.
automatic exercise
Beginning in June 2008, the Options Clearing Corporation (OCC) adopted a rule that all options that are a penny or more in the money (ITM) at expiration are to be exercised at expiration. Therefore, ITM options with intrinsic value of $0.01 or more are automatically exercised at expiration. This is to ensure that options holders don't inadvertently leave money on the table by allowing ITM options to expire.
back-month options
Options with the most distant expirations within a class of options.
bear call spread
A strategy that involves selling a call and buying a call at a higher strike within the same expiration month. ...

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