Chapter 7

An option that can be exercised at any time during the option contract.

Call (put) option with the market value equalling the exercise price expires __-___-_____

An option to "buy" an underlying at a specified price.

In futures markets, this serves as the third party to all transactions. That is, the buyer of a futures contract effectively buys from them and the seller sells to them. This third party evaluates the buyer and sellers' creditworthiness.

The amount that buyers and sellers pay to transact in the futures market is a single amount paid up front that covers the round-trip transactions of initiating and closing out the position. These days, it's often less than $2 per currency futures contract.

A security whose value is contingent upon the value of the underlying security. Examples are futures, forward, and options contracts.

Specifies the amount of the underlying foreign currency for future purchase or sale.

A limit as to how much the settlement price can increase or decrease from the previous day's settlement price in regards to futures exchanges.

Included in futures contracts, these are time during the year in which contract mature on a specified day of the month.

An option that can be exercised only at the maturity date of the contract.

Traded on organized exchanges rather than over the counter.

The prespecified price paid or received when an option is exercised.

A standardized foreign exchange contract with a future delivery date that is traded on organized exchanges.

One who attempts to eliminate the risk of an unfavorable price change in an asset by taking an offsetting position in another asset, usually a derivatives contract.

Call (put) option with the market value exceeding the exercise price expires __-___-_____

An initial collateral deposit needed to establish an asset position.

The immediate exercise value of an American option.

Buyer of an option is often referred to as the ____

Collateral needed to maintain an asset position.

The process of establishing daily price gains and losses in the futures market by the change in the settlement price of the futures contract.

Date in which a forward, future, or option contract is due.

In determining open interest, this is the next delivery month after the current contract.

The total number of short or long contracts outstanding for a particular delivery month in the derivative markets.

A contract giving the owner the right, but not the obligation, to buy or sell a given quantity of an asset at a specified price at some date in the future.

Call (put) option with the market value less than the exercise price expires ___-__-___-_____

Because the option owner does not have to exercise the option if it is to his disadvantage, the option has a _______

The settlement price on the last day of trading will be the current spot price because price discovery is complete.

Obtaining the market's forecast of the spot exchange rate at different future dates.

An option to sell an underlying asset at a prespecified price.

A trade in either the futures or forward market that will neutralize a position.

A price representative of futures transaction prices at the close of daily trading on the exchange. It is determined by a settlement committee for the commodity, and it may be somewhat arbitrary if trading volume for the contract has been light for the day.

One who attempts to profit from a favorable, but uncertain, price change in an asset by acquiring a position in it.

Contract size, maturity date, delivery months are the same over the different commodities and currencies.

The difference between the option premium and the option's intrinsic value is nonnegative and refered to as the option's ____ _____

The seller of an option is referred to as the ______ or _____

The sum of the long and short's daily settlement is zero. Thus, futures trading between the long and the short is a ____-___ ____.