Word of the Day
Futures Terms that begin "O"
Offsetting
liquidating open positions by either selling fungible contracts in the same contract month as an open long position or buying fungible contracts in the same contract month as an open short position.
One Cancels the Other (OCO) Order
A pair of orders, typically limit orders, whereby if one order is filled, the other order will automatically be cancelled. For example, an OCO order might consist of an order to buy 10 calls with a strike price of 50 at a specified price or buy 20 calls with a strike price of 55 (with the same expiration date) at a specified price.
Open Interest
The total number of open long (or short) positions in a given contract month.
Open Outcry
A method of public auction, common to most U.S. commodity exchanges, where trading occurs on a trading floor and traders may bid and offer simultaneously either for their own accounts or for the accounts of customers. Transactions may take place simultaneously at different places in the trading pit or ring. At most exchanges outside the U.S., open outcry has been replaced by electronic trading platforms.
Open Position
A futures contract position that has neither been offset nor closed by cash settlement or delivery.
Open-ended product/fund
A product that is permanently open for investment. New units (shares, bonds, units) are created or dissolved as required. Investors can subscribe (buy) or redeem (sell) these units at the prevailing net asset value per unit in accordance with the details set out in the relevant product prospectus.
Opening Price (or Range)
The price (or price range) recorded during the period designated by the exchange as the official opening.
Option
A derivative instrument that gives the holder the right, but without any obligation, to buy (call) or sell (put) a security or asset at a fixed price within a specified period or at a particular future date.
Option Pricing Model
A mathematical model used to calculate the theoretical value of an option. Inputs to option pricing models typically include the price of the underlying instrument, the option strike price, the time remaining till the expiration date, the volatility of the underlying instrument, and the risk-free interest rate (e.g., the Treasury bill interest rate). Examples of option pricing models include Black-Scholes and Cox-Ross-Rubinstein.
Oversold
A technical opinion that the market price has declined too steeply and too fast in relation to underlying fundamental factors; rank and file traders who were bearish and short have turned bullish.