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Glossary

  • Long – Buy
  • Short – Sell
  • Bullish – Attitude that prices are going higher
  • Bearish – Attitude that prices are going lower
  • Margin – A performance bond that is collateral to a position in the futures market or short options; settled daily
  • Cash Market – The destination where physical products are bought and sold
  • Hedger – One who uses options to offset price risk inside of their current business and in conjunction with pricing activities.
  • Premium – The amount paid for a put or a call
  • Strike Price – The price at which a put or call can be exercised.
  • In-the-Money – A put option with a strike price above the current futures price or a call option with a strike price below the current futures price.
  • At-the-Money – An option with a strike price that equals the futures price
  • Out-of-the-Money – A put option with a strike price below the current futures price or a call option with a strike price above the current futures price.
  • Time Decay – The decreasing value of an option as it nears its date of expiration
  • Volatility – Rapid and unexpected change. Acts as a component of the valuation of an option.