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Futures Terms |
| Browse our glossary of terms by using the Alphabet below. You may also search the glossary by using the search box in the right column. | |
| P | |
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| Term | Definition |
|---|---|
| Performance Bond | A deposit made by a futures trader protecting the clearinghouse from the risk of default. |
| Physical Delivery | The tender or receipt of the contract's underlying commodity to fulfill the delivery requirements of the futures contract. A Single Stock Futures contract's underlying commodity is normally 100 shares (plus or minus the impact of corporate events) of the common stock or American Depository Receipts (ADRs). |
| Premium | The amount paid for an option.
The premium of an option is generally composed of two parts:
1. The “intrinsic” value (the smaller of either:
|
| Principle of indifference | The state of two financial positions being of equivalent worth or economic utility to a trader. The principle of indifference is the basis for arbitrage pricing. |
| Purchase Price | The total actual cost paid or to be paid, directly or indirectly, by a person to acquire a commodity option. This price includes all commissions and other fees, in addition to the option premium. |
| Purchaser | An individual who buys an option. Such a person is said to have a long position. |
| Put Option | The buyer of a put option has the right, but not the obligation, to sell an underlying asset at a specified "strike" price on (in the case of a "European"-style exercise) or by (in the case of an "American"-style exercise) a specified expiration date. The buyer pays the seller a "premium," and may profit if the price of the underlying asset is at a level below the strike price plus the premium paid, by the put’s expiration date. The seller of a put option receives and keeps the premium, but may have to sell the stock if the buyer "exercises" the option.
Both buyers and sellers of options can offset their positions. |