Glossary

At the money (ATM) – option strike that is closest to the actual stock price.
Call – type of option purchased when the buyer believes the price of a stock will increase.
Candles – A visual display of price movement on the chart.
Credit – Money paid to the seller for selling an option strategy.
Entry Point – Price to enter a position in desired stock.
Exercise -agreement to purchase an option at the end of expiration.
Debit – Money paid by the buyer for buying an option strategy.
In the money (ITM) – option strike that has enough value to be exercised at expiration.
MACD – A technical indicator that gives you the sign that buyers or sellers have a greater chance of control.
Moving Average – A visual line on the chart derived from prior prices.
Option – A contract that gives you the option to buy shares of stock at a specified price called the strike price. One option contract represents 100 shares.
Option chain – List of call and put options.
Over Bought – Condition where buyers are exhausting a move.
Over Sold – Condition where sellers are exhausting a move.
Out the money (OTM) – option strike that does not have enough value to be exercised at expiration.
Put – type of option purchased when the buyer believes the price of a stock will decrease.
Ratio spread – An option strategy involving buying 2 lower strikes and selling a higher strike.
Risk/reward profile – A visual display of the probability of an option strategy.
RSI – A technical indicator that shows money flow of a stock.
Resistance – Price level where sellers don’t allow a stock to go above.
Spread – An option strategy involving a combination of buying a strike and selling a strike.
Strike – Fixed price for calls or puts.
Support – Price level where buyers don’t allow a stock to go below.
Trend – Overall direction of the specified stock.
Trend line – Arbitrary line drawn to reflect a direction of a stock price.

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