Orders, Liquidity and Execution
25 words you meet in options, each one explained plainly.
Ask Size
Ask size indicates the quantity displayed as available for sale at the current ask price.
Average Fill Price
Average fill price is the weighted average price at which an order executes when it receives multiple fills. Example You buy: 2 contracts at $5.00...
Bid Size
Bid size indicates the quantity displayed as available to buy at the current bid price.
Buy to Close
Buy to close is an instruction used to reduce or close an existing short options position by purchasing an offsetting option contract.
Buy to Open
Buy to open is an instruction used to establish a new long options position by purchasing an option.
Closing Transaction
A closing transaction reduces or eliminates an existing options position. This can occur through: Sell to Close or Buy to Close.
Credit Order
A credit order is an options order that results in the trader receiving a net premium when the position is established.
Debit Order
A debit order is an options order that requires the trader to pay a net premium to establish the position.
Mid Price
The mid price is the price halfway between the current bid and ask. If: Bid = $4.80 Ask = $5.20 then: Mid = $5.00
Multi Leg Order
A multi leg order combines two or more option positions into a single strategy order. Examples include: vertical spreads, straddles, strangles, iro...
Natural Price
Natural price is commonly used to describe the immediately available side of the market for an options order. For a straightforward purchase, this...
Net Credit
A net credit occurs when the total premium received from the legs of an options strategy exceeds the premium paid. Example Sell option: $6 Buy opti...
Net Debit
A net debit occurs when the total premium paid for the legs of an options strategy exceeds the premium received. Example Buy option: $6 Sell option...
Opening Transaction
An opening transaction establishes or increases an options position. This can occur through: Buy to Open or Sell to Open.
Option Leg
A leg is one individual component of a multi position options strategy. Example A bull call spread contains two option legs: Buy one call and Sell...
Option Quote
An option quote displays current market information for an option contract, commonly including the bid, ask and associated sizes, alongside other d...
Options Liquidity
Options liquidity refers specifically to the ease of trading individual option contracts or strategies at competitive prices.
Options Volume
Options volume measures trading activity in an option contract over a specified period.
Per Contract Fee
A per contract fee is a trading charge calculated according to the number of option contracts traded.
Price Improvement
Price improvement occurs when an order executes at a better price than the relevant quoted price or the price the trader might otherwise have accep...
Sell to Close
Sell to close is an instruction used to reduce or close an existing long options position by selling the option.
Sell to Open
Sell to open is an instruction used to establish a new short options position by selling an option.
Transaction Cost
Transaction cost is the total economic cost associated with executing a trade. Depending on context, this can include explicit fees and implicit co...
Volume vs Open Interest
Volume versus open interest compares current trading activity with the number of outstanding contracts.
Working an Order
Working an order means actively managing a limit order rather than immediately accepting the available market price. A trader may begin with a more...