What Is an Option Premium? An option premium is the current market price of an option contract. It is thus the income received by the seller (writer) of an option contract to another party. In-the-money option premiums are composed of two factors: intrinsic and extrinsic value. Out-of-the-money options premiums consist solely of extrinsic value. For
What Is Option Pricing Theory? Option pricing theory estimates a value of an options contract by assigning a price, known as a premium, based on the calculated probability that the contract will finish in the money (ITM) at expiration. Essentially, option pricing theory provides an evaluation of an option’s fair value, which traders incorporate into
What Is Options Backdating? Options backdating is the process of granting an employee stock option (ESO) that is dated before its actual issuance. In this way, the exercise (strike) price of the granted option can be set at a lower price than that of the company’s stock price at the granting date. This process makes
What Is Opening Price? The opening price is the price at which a security first trades upon the opening of an exchange on a trading day; for example, the New York Stock Exchange (NYSE) opens at precisely 9:30 a.m. Eastern time. The price of the first trade for any listed stock is its daily opening
What Is the Opening Range? The opening range (OR) describes a security’s high and low price for a short period just after the market opens, often the first fifteen minutes of the trading day. Day traders often monitor a stock’s opening range because it can provide an indication of market sentiment and price trend for
What Is Open Interest? Open interest is the total number of outstanding derivative contracts, such as options or futures that have not been settled for an asset. Open interest keeps track of every open position in a particular contract, rather than tracking the total volume traded in it, which may also included netting or closing
What Is an Open Listing? An open listing in real estate is a property for sale which may be shown by multiple real estate agents. The agents compete to find a buyer for the property. The open listing is the opposite of an exclusive listing, in which a real estate agent is engaged by the
What Are Open Market Operations (OMOs)? Open market operation (OMO) is a term that refers to the purchase and sale of securities in the open market by the Federal Reserve (Fed). The Fed conducts open market operations to regulate the supply of money that is on reserve in U.S. banks. The Fed purchases Treasury securities
What is Open-Market Rate The open-market rate is the rate of interest paid on any debt security that trades in the open market. Interest rates for such debt instruments as commercial paper and banker’s acceptances would fall under the category of open-market rates. Debt securities include government bonds, corporate bonds, certificate of deposit (CD), municipal bonds and preferred
What Is an Open-Market Transaction? An open-market transaction is an order placed by an insider, after all of the appropriate documentation has been filed with the Securities and Exchange Commission (SEC), to buy or sell restricted securities openly on an exchange. An open-market transaction is a legal way for an individual with insider information of
