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1.2- Basic Option Terminology

There are several basic definitions regarding option contracts that must be memorized. This lesson will introduce each one. Future lessons will cover them in more detail.

Option Type

All exchange-listed equity options are one of two types: Call Options or Put Options.

Option Style

All equity option contracts are either American-style or European-style

Strike Price

Every option contract has a strike price. This is the fixed price at which the underlying asset may be purchased or sold at.

Expiration Date

Each option contract has an expiration date. This is the latest date in which the option contract may be exercised.

Premium

This is the market value of the option contract.

Underlying

An equity option’s underlying asset is the stock that the contract represents

It is important to take time to memorize these terms. They will be applied throughout the entire course.