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review_part3 - Options Terminology A call gives the holder...

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Options Terminology A call gives the holder the right to buy some underlying security at a prespecified price and date. A put gives the holder the right to sell. The strike price of an option is the price at which the sale or purchase of the underlying security is made. The expiration date is the last day on which the option contract may be exercised. A European option may be exercised only on the expiration date. An American option may be exercised at any time up and until the expiration date. The price of an option is sometimes called the option’s premium . Writing and selling an option are synonymous. A at-the-money (ATM) option is an option whose strike price is approximately equal to the current value of the underlying. An in-the-money (ITM) option is an option that if exercised immediately would result in a positive payoff. An out-of-the-money (OTM) option is an option that if exercised immediately would not result in any payoff.
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