Underlying Option Security

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Dictionary Says

Definition of 'Underlying Option Security'

An underlying option security is the financial instrument on which a derivative's (i.e., an option's) value is based – it provides the price that is used to determine the value of the derivative. An option is classified as a derivative because its value is derived from the underlying security.
Investopedia Says

Investopedia explains 'Underlying Option Security'

An option holder has the right, but not the obligation, to buy or sell a particular instrument at a specified price and date in the future.

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'Underlying Option Security'

  • Can an option have a negative strike price?

    http://www.investopedia.com/ask/answers/06/negativestrikeprice.asp
    ... This would mean that no matter what happened to the price of the underlying
    security, the option holder would exercise the option. ...

  • My brokerage firm won't allow naked option positions. What does ...

    http://www.investopedia.com/ask/answers/05/NakedOptions.asp
    ... For example, if the writer of a call option does not own the underlying security,
    he will be exposed to extreme risk because if the price of the underlying ...

  • Advanced Option Trading: The Modified Butterfly Spread

    http://www.investopedia.com/articles/optioninvestor/10/modified-butterfly-spread.asp
    ... Typically the strike price of the option sold is close to the actual price of the
    underlying security, with the other strikes above and below the current price ...

  • Selecting A Hot SPOT Option

    http://www.investopedia.com/articles/optioninvestor/08/spot-options-investing.asp
    ... Another type of binary option is the "up/down", where an investor believes a underlying
    security is going to finish up or down on the previous day's settlement ...

  • Series 7 Study Guide - Derivatives - Spread Option Strategies ...

    http://www.investopedia.com/exam-guide/series-7/derivatives/option-spread-strategy.asp
    ... hedge a position: Spreads A spread is a position consisting of the purchase of an
    option and the sale of another option on the same underlying security with a ...

  • Profit On Any Price Change With Long Straddles

    http://www.investopedia.com/articles/optioninvestor/09/long-straddle-options-trading.asp
    ... The maximum risk for a long straddle will only be realized if the position is held
    until option expiration and the underlying security closes exactly at the ...

  • I own options on a stock, and it's just announced a split. What ...

    http://www.investopedia.com/ask/answers/03/092103.asp
    ... While a stock split will adjust the price of the underlying security of an option,
    the option is adjusted so that any changes in price due to the split do not ...

  • Options Trading: The Modidor Spread

    http://www.investopedia.com/articles/optioninvestor/10/modidor-spread.asp
    ... By putting on this position, a trader establishes a range of profitability as long
    as the underlying security stays within a particular range prior to option ...

  • Rolling LEAP Options

    http://www.investopedia.com/articles/optioninvestor/07/rolling_leaps.asp
    ... Using the spread between a two-year and one-year option of the underlying
    security at the same strike price, is a reasonable proxy. ...

  • Series 7 Study Guide - Derivatives - What Are Options? ...

    http://www.investopedia.com/exam-guide/series-7/derivatives/options.asp
    ... is an option? It is a contract that grants its owner the right, but not the obligation,
    to make a transaction in an underlying commodity or security at a ...

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