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Options Trading -- 17 Odd Options Definitions You?ve Never Heard

Posted July 15, 2010

Topics: Finance & Investing

Anyone who has taken a look at options knows the jargon can be discouraging. Below are several terms you may not have heard before, and definitions you definitely have not ever seen.

Butterfly spread -- a ranch or farm owned by a butterfly, moth or other winged insect.

Contango -- a dance competition in which contestants are incarcerated.

Hedge ratio -- the portion of a yard taken up by hedges compared to the total lawn area.

Currency swap - a transaction in which one’s wallet is removed during a robbery.

Margin -- substitute for the butterfly spread, also called oleo.

Time decay -- the fashion season as defined by designed Donna Karan.

CME -- abbreviation used by supervising brokers when they need to speak with subordinates.

Call away -- a sign placed on a broker’s desk while on a break.

Double witching -- condition of a divorced man contending with an ex-wife and ex-mother-in-law.

Short call condor -- a condor whose plan does not allow rollover minutes.

Exercise limit -- the maximum daily treadmill time a broker is able to withstand.

Present value -- the amount a loved one spends on a birthday gift.

Floor broker -- the bottom level, or most broke a trader can be from losing on options trades.

Short selling -- activity in the undergarments department of Sears.

Forced liquidation -- see water boarding.

Fungibility -- one’s tolerance for the taste of mushrooms.

Return if unchanged -- instructions from a dermatologist if prescription does not cure a rash.

Michael C. Thomsett is an options author and has written for FT Press’ Agile Investor series, which can be viewed on FTPress.com. Thomsett’s latest FT Press book is Put Option Strategies for Smarter Trading.