Understanding Equity Options - The Options Clearing Corporation

In-the-money: A call option is in-the-money ifthe strike price is less than the market price of theunderlying security. A put option is in-the-money ifthe strike price is greater than the market price of theunderlying security.Intrinsic value: The amount by which an option isin-the-money.LEAPS : Long-term Equity AnticiPation Securities,or LEAPS, are long-term equity or index options.Long position: A position wherein an investor’sinterest in a particular series of options is as a netholder (i.e., the number of contracts bought exceedsthe number of contracts sold).Margin requirement (for options): For customerlevel margin, the amount an option writer is requiredto deposit and maintain with his broker to cover aposition. The margin requirement is calculated daily.Naked writer: See Uncovered call writing andUncovered put writing.Opening purchase: A transaction in which thepurchaser’s intention is to create or increase a longposition in a given series of options.Opening sale: A transaction in which the seller’sintention is to create or increase a short position in agiven series of options.Open interest: The number of outstanding optioncontracts in the exchange market or in a particularclass or series.Out-of-the-money: A call option is out-of-themoneyif the strike price is greater than the marketprice of the underlying security. A put option is outof-the-moneyif the strike price is less than the marketprice of the underlying security.Premium: The price of an option contract, determinedin the competitive marketplace, which thebuyer of the option pays to the option writer for therights conveyed by the option contract.36