What Does It Mean?Glossary of Common Terms
Find out the meaning of common terms used in discussing stock and options trading.
An options strategy created by a comination of a bull spread and a bear spread with the same expiration but different strike prices.
Financial contracts that give a buyer of an option the right and the seller of an option the obligation to buy a financial instrument at a specified price within a specified time period.
The Complex Order Book (COB) data with quote, order and executed trade information for multi-leg strategies that were executed as a unit such as spreads, straddles.
An options strategy implemented to protect against large losses but also limiting large gains. It is created by purchasing an out of the money put option while writing an out of the money call option with the same expiration dates.
The Consolidated Tape Association. A Security Information Processor (SIP) for US equities; a feed of real-time trade and quote information in the NYSE (Network A), AMEX, CBOE, and various regional exchanges (Network B).
Consolidated Tape System – Trade Data. Trade information for instruments traded on the American Stock Exchange, Cboe exchanges, ISE, MEMX, MIAX, Nasdaq exchanges New York Stock Exchange, PHLX.
Consolidated Quote system – Quote Data. Quote information for instruments traded on the American Stock Exchange, CBOE exchanges, ISE, MEMX, MIAX, Nasdaq exchanges New York Stock Exchange, PHLX.
One of the 4 major risk measures used by options traders. Delta measures the degree to which an option is exposed to shifts in the prices of the underlying asset or commodity. Delta represents the amount that an option’s price will change for every $1 move in the underlying asset.
EOD OPTIONS DATA
End Of Day information on put and call options; Open, High, Low, Close, Volume, Greeks, Implied Volatility and Vol Surfaces.
A common equity derivative intstrument based on the value of the underlying security in which parties contract to transact an asset at a specified price at a future date.
One of the 4 major risk measures used by options traders. Gamma is a measure of the rate of change of Delta over time. Gamma provided traders with an idea of future expectations
An options strategy created with simultaneous long and short positions on the same underlying asset, same strike price with different expiration months.
INTRADAY OPTIONS DATA
Snapshots, at various time frequencies during the daily trading session, of put and call options: Open, High, Low, Close, Volume, Greeks, Implied Volatility and Vol Surfaces.
HISTORICAL OPTION ANALYTICS
Historical options trading statistics, greeks, volatility information to help analyze and visualize changes in options prices and impacts on value and risk.
The market’s expectation of a likely future move in a security’s price. IV exists because of discrepancies between how the market prices the security and a theoretical value given by a stock option pricing model.
IRON CONDOR SPREAD
Options strategy consisting of a vertical put spread and a vertical call spread with different strikes and the same expiration date.
MARKET DATA API
A market data API is a software program that reads market data, typically from a multicast feed, and converts this to a normalized format.
Price and trade data related to the financial instruments and reported by specific trading venues such as a stock exchange. This type of data allows traders and investors to know the latest price of instruments such as stocks, fixed-income products, derivatives, and currencies.
NORMALIZED OPRA FEED
“Raw trades and quotes data, coming from all US options exchanged reported by OPRA (Options Price Reporting Authority) structured in accordance with a series of “”normal forms”” in order to reduce data redundancy and improve data integrity. Normalization makes sure that all of your data looks and reads the same way across all records.
OPRA is a national market system plan that governs the process by which options market data is collected from participant exchanges, consolidated and disseminated.”
MULTICAST MARKET DATA FEEDS
Multicast feed is real-time data published on a set of multicast channels and includeS all trades, bid/offer prices.
NORMALIZED OPTION DATA
Data from various options exchanges, taken in as raw data that use protocols unique to each exchange, converted into a single protocol different from the ones used by the originating exchange or venue via feed handlers. This allows an entity to receive one feed using one protocol thus lowering cost of ownership, development, and overall management of the feeds.
NYSE TAQ DATA
NYSE Trade And Quote (TAQ) data contains intraday trades and quotes for all securities listed on New York Stock Exchange (NYSE), American Stock Exchange (AMEX), and NASDAQ National Market Systems (NMS) and SmallCap issues.
Trades and quotes disseminated from all US options exchanges which are reported by Options Price Reporting Authority (OPRA). OPRA is a national market system plan that governs the process by which options market data is collected from participant exchanges, consolidated, and disseminated.
OPTION RISK ANALYTICS
Analysis showing how price and volatility changes affect an option’s value and risk dimensions including tools to help visualize changes in value with respect to changes in Greeks.
“Options Clearing Corporation is a United States clearing house. It specializes in equity derivatives clearing, providing central counterparty clearing and settlement services to 16 exchanges.
OCC’s participant exchanges include: BOX Exchange LLC, Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange, Inc., Miami International Securities Exchange, LLC, MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq BX, Inc., Nasdaq MRX, LLC, Nasdaq PHLX, LLC, Nasdaq Options Market, LLC, NYSE American Options, LLC, and NYSE Arca, Inc”
Analysis showing how price and volatility changes affect an option’s value and risk dimensions. Tools to help visualize changes in value with respect to changes in Greeks.
Inputs that determine the value of an option.Underlying price, exercise price, time to expiration, risk-free rate, volatility and interim cash flows & costs.
Greeks measure variety of factors that affect the price of an option contract and describes different risk parameters.
OPTION TICK DATA
Intraday data on options for each executed trade or bid/ask quote.
The difference in implied volatility between out of the money options, at the money options and in the money options. The concept that options contracts for the same underlying security with different strike prices and the same expiration will have different implied volatilities.
OPTIONS ON FUTURES
A contract that gives the holder the right, but not the obligation, to buy or sell a specific futures contract at a strike price on or before the option’s expiration date. Similar to a stock option but differ in that the underlying security is a futures contract.
An option’s sensitivity to dividends.
The highest resolution tick by tick data.Each print (tick) record contains the trade price, volume of trade, the exchange the trade was executed on as well as a timestamp.
Financial contracts that give a buyer of an option the right and the seller of an option the obligation to sell a financial instrument at a specified price within a specified time period.
REAL TIME ANALYTICS
Analytics showing how price and volatility changes affect an option’s value and risk dimensions delivered immediately after inputs are collected.
Rho is the rate at which the price of an option changes relative to a change in the risk-free rate of interest. Rho measures the sensitivity of an option to a change in an interest rate.
A feed produced by the Securities Information Processor (SIP) that links the US markets by processing and consolidating all bid/ask quotes and trades from every trading venue into a single, easily consumed data source.
The Nasdaq Smart Options data feed is designed to provide a cost-efficient, low-bandwidth alternative to the full Options Price Reporting Authority (OPRA) data feed while still delivering the necessary dataset that firms require for options trading.
STOCK IMBALANCE FEED
Stock imbalance records contain buy and sell imbalance records during auctions throughout the trading day.
One of the 4 major risk measures used by options traders.Theta measures the impact of a change in time remaining to expiration. It is also refered to as the time decay of an option; the amount by which an option’s value declines every day.
Part of the UTP feed – Trade data feed.
Unlisted Trading Privileges (UTP) is Nasdaq’s security Information process (SIP) for trading securities that do not meet the requirements for listing on an exchange.
Part of the UTP feed – Quote data feed.
One of the 4 major risk measures used by options traders. Vega is a measure of the impact of changes in the underlying volatility on the option price. Vega expresses the change in the price of the option for every 1% change in underlying volatility.
An options strategy involving buying and selling of multiple options of the same underlying security, same expiration date but different strike prices. Created with either all calls or all puts.
Volatility options are a type of option with a volatility index as the underlying factor. A volatility index represents the market’s expectation of volatility in financial markets (for example the stock market) over a certain period of time in the future. Examples of volatility indices are the VIX or VSTOXX.
The volatility surface refers to a three-dimensional plot of the implied volatility of a stock option. It is used in options pricing to show the expected volatility of the option’s underlying stock over the life of the option. The volatility surface is a three-dimensional plot where the x-axis is the time to maturity, the z-axis is the strike price, and the y-axis is the implied volatility.
ZERO COST COLLAR
A form of an options collar strategy. It is created by purchasing an out of the money put option while writing an out of the money call option with the same expiration dates and the same premiums