By Chuck Kowalski
Definition: Underlying refers to the commodity or futures contract upon which a given option is based. The price movement of the underlying dictates the price of a option contract.
The instrument, such as shares and commodities on which a futures or options contract is based.
The specific security, commodity, index or financial instrument that an option or futures contract is traded.
News On Underlying Interest ...
A security that must be delivered or accepted when an options or futures contract is exercised or when it matures
Both commodities and financial instruments (shares, bonds, currencies, indices, etc.) can underlie derivatives contracts.
In finance, an underlying is an investment from which a derivative security is derived. Underlyings are invariably more common and more widely heard of than the securities derived from them.
What is the definition of Underlying Asset?
The underlying asset is the item being traded and exchanged between dealers and traders on a financial exchange. This refers to stocks, commodities, currencies and other Contract-for-Difference (CFD) instruments.
It is a financial instrument which must be delivered in completion of an option or futures contract.
Municipal bonds issued by government entities but under the control of larger government entities and for which the larger entity shares the credit responsibility. ...
Underlying Commodity: The cash commodity underlying a futures contract. Also, the commodity or futures contract on which a commodity option is based, and which must be accepted or delivered if the option is exercised.
Underlying Asset - The stock, commodity, futures contract, or cash index to be delivered in the event an option is exercised.
Underlying Security - The equity (either stock, index or ETF) whose shares are represented by the option contract that has been sold or purchased.
Underlying Stock - The underlying stock is the stock for which you are purchasing the option.
Underlying Asset - In order to write an options trading contract, you certainly have to include the commodities that contract is buying. Corn futures, gold and silver are all examples of commodities that can be underlying assets.
The security on which options are being bought or sold.
Underwriter (Investment Banker)
An intermediary between the offering institution and the investing public, bringing the new issues to the market while charging the issuer a fee for the services provided.
A trading instrument subject to purchase upon exercise.
1. Options: The security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options.
The underlying asset that gives value to a futures contract could be shares, share market indices, commodities, currency, interest rates, weather etc.
LOT SIZE ...
The presence of a Key Reversal Bar usually signals a reversal of psychology and a subsequent retracement of recent gains.
Underlying fluctuations: It is important to know what index or portion of an index the ETF is tracking; the broader the market, the less volatility.
ASX approved indices (currently the S&P/ASX 200 Index)
Exercise style ...
UNDERLYING CASH INDEX INFORMATION
VXN is calculated in real-time by the Chicago Board Options Exchange (CBOE) and is disseminated every 15 seconds through the Options Price Reporting Authority (OPRA) from 8:30 a.m. to 3:15 p.m. (Chicago time) during each trading day.
1. In derivatives, the security that must be delivered when a derivative contract, such as a put or call option, is exercised.
In this pattern prices edge steadily higher in a converging pattern i.e. there are higher highs and higher lows indicating that bulls are winning over bears. However, at the breakout point the bears emerge the victors and the price descends.
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Underlying determinants of the level of economic activity
Gross Domestic Product (GDP) - The broadest measure of economic activity is the gross domestic product or GDP, which represents the value of the total amount of goods and services produced in a national economy (e.g.
A class of options is all the puts and calls on a particular underlying instrument. The something that an option gives a person the right to buy or sell is the underlying instrument.
Standard & Poor's 500 Index (SPX)
European: they may generally be exercised only on the last business day before expiration.
Underlying asset, underlying instrument: The instrument (shares, bonds, stock index.) that can be purchased (in case of call) or sold (in case of a put) by a buyer who exercises his option.
UNDERLYING SECURITY Options: the security subject to being purchased or sold upon exercise of an option contract. For example, IBM stock is the underlying security to IBM options. Depositary receipts: The class, series and number of the foreign shares represented by the depositary receipt.
underlying security - the stock, bond, index, or other financial instrument upon which a derivative such as an option is based. It is the underlying security that is subject to being bought or sold upon exercise of the option.
Underlying Fund Expenses - You will also indirectly pay the fees and expenses imposed by the mutual funds that are the underlying investment options for your variable annuity.
The "something" that the parties agree to exchange in a derivative contract.
Undiversifiable risk ...
The security subject to being purchased or sold upon exercise of the option contract.
Unified Exchange Compensation Fund Scheme ...
Underlying Security: The security upon which a derivative (option, index, futures contract) or other security is based. Eg, an ASA option is based upon the price of ASA stock. The S&P 500 futures index is based upon the S&P 500 stock index.
may sound musical, but refers to the stock, security, or other financial thing that is the basis of the value of a financial derivative. For spread betting, it's whatever you are betting on, whether currencies, indices, stock values, or something else.
Up Bet ...
Underlying Security - The security which one has the right to buy or sell via the terms of a listed option contract.
Undervalued - Describing a security that is trading at a lower price than it logically should. Usually determined by the use of a mathematical model.
Financial instrument that underlies an option, future, warrant or other instrument.
The index that a tracker follows ...
Underlying Asset - The security which one has the right to buy or sell via the terms of a listed option contract. An underlying asset can be any financial instrument on which option contracts can be written based on. Some examples are : Stocks, ETFs, Commodities, Forex, Index.
An asset, basket of assets, index or rate upon the basis of which the value and cash flows or deliverables under a derivative transaction are calculated.
A transaction that cannot be identified by the alleged counterparty to the trade.
Underlying Commodity: The commodity or futures contract on which a commodity option is based, and which must be accepted or delivered if the option is exercised. Also, the cash commodity underlying a futures contract.
Underlying liquidity: The liquidity in the underlying basket of the ETF. This liquidity is not always visible on the stock exchange, but market makers can facilitate large investments into ETFs if there is sufficient underlying liquidity.
Underlying Futures Contract
The specific futures contract that the option conveys the right to buy (in case of a call) or sell (in the case of a put).
Up Front Fees
Fees charged to a pool or a managed account prior to commencement of trading for the pool or account.
You must consider the characteristics of the underlying contract. The chart below shows the average daily volume of the e-mini S&P: ...
Underlying Financial Market Assumptions and Issues
Commentators talking and writing about 'gold mining stocks' often seem to base their views on unstated underlying assumptions that:
the financial markets are properly reading the current macro-economic climate, and ...
The Underlying Asset.
The exchanged asset must be properly defined. If the underlying asset is a financial instrument, this is not a problem but if the underlying asset is a commodity, there may quite a variation in the quality of what is available on the market.
Why Underlying Liquidity Matters
Underlying liquidity matters because often, investors making large trades can get better pricing in an ETF than they otherwise might think.
Other Underlying Assets
In addition to credit risk and currency, the value of OTC derivatives can be based on assets like commodities, bonds and shares of stocks. Reference values, such as an equity index, can also be used to determine the value of these derivatives.
First, the parent company establishes a wholly-owned special purpose subsidiary (a grantor trust), whose sole purpose is to issue the securities. The holding company then acquires all of the special purpose trust's common stock.
Underlying: Close point of DJX at current date, 84.48.
In table 1, there are the prices on Dec.
Underlying the huge earnings beat was another quarter of revenue declines highlighted by NetApp (Nasdaq: NTAP ) cutting back on its needs for Xyratex's storage products.
The security that may be bought with a call, or sold with a put. On Series 7 the underlying securities include:- 100 shares of a ...
Because both the call and the put have the same strike price, the options are at- or near-the-money when the straddle is bought or sold.
The security or commodity to be purchased or sold when an option contract is exercised.
What supports the security or instrument that parties agree to exchange in a derivative contract.
The security or property or loan agreement that an option gives the option holder the right to buy or to sell.
The stock to be delivered in the event an option is exercised.
Derivatives are based on an underlying, or underlying asset, which may a bond, currency, index, raw material, interest, etc.
Describes an investment's return below that of the predefined comparative index.
Underlying principles in these methods apply swing principles in charts that dont have any time element. Therefore, the concepts of price reversal from PnF, equal sized boxes or bricks from Renko and trend from Kagi can be combined together to get a fairly simple and interesting view of price.
Underlying - The security on which options are being bought or sold.
Underlying Security - The security on which options are being bought or sold.
The underlying idea is that investors require a rate of return from their resources - i.e. equity - under the control of the firm's management, compensating them for their opportunity cost and accounting for the level of risk resulting.
The underlying elements that the economy of the subject is studied from Forex fundamental analysis. Under this method, the analysis of economic indicators, social factors and the government policy of a business cycle can forecast price movements and trends of the market.
The underlying component of fiscal policy is the government's budget, which determines how much it will spend on various goods and services. The amount of the budget is usually tied to tax revenues and other sources of income for the government.
The underlying assets or instruments which are traded in the cash market.
The underlying assets or instruments that are traded in the cash market.
The underlying asset is most commonly a financial security (e.g. shares or bonds), a commodity (e.g. a fixed quantity of a metal) or linked to a financial index.
The underlying forces behind the Elliott Wave Theory are of building up and tearing down. The basic concepts of the Elliott Wave Theory are listed below.
The underlying stock (e.g. AAPL, DELL, MSFT, etc.)
The Expiration Date of the contract (i.e. Third Friday of the Expiration Month)
The Strike Price (or Exercise Price)
Option Type: Call or Put option
The Price of the option contract, which is often called "Premium"
Number of option contracts ...
The underlying point behind all the model construction is that of finding a value that arbitrage will enforce. Arbitrage is always a self-terminating activity -- it brings prices to a level at which it can no longer occur.
The underlying share is the actual share that the CFD is based on - remember you are not actually taking ownership and therefore trading the share.
When you trade a CFD of a share, the price of the CFD and the share will be the same - they do not trade any differently.
Using leverage ...
The underlying commodity in a futures contract. Example: Coffee is the cash commodity in a coffee futures contract. Interchangeable with "actual' and 'spot' commodity Related Terms: Spot Commodity
Cash Market ...
The underlying point that you should take away from today's lesson is that the more you push and 'try' to make money in the markets by burning your eyeballs out staring at lower time frame charts, the more the money you so badly desire will elude you.
The underlying asset traded and the time to expiration are a couple of big components to the equation. Normally, a market that is relatively less volatile and an expiration time that is longer usually means a lower percentage payout.
Long underlying stock/future
Short OTM call option
Long OTM put option
Risk / Reward ...
The (underlying) EBITDA margin is calculated by dividing EBITDA (before special items) by sales
Economic cycle ...
Strong underlying economic fundamentals have made GBP a juggernaut against its rival currencies.
But the underlying logic of that criticism, and Buffett’s philosophy as well as the nature of trend following says that now is the time.
The cash underlying a forward trade does not have to be paid until the contract expires, whereas the cash behind futures is calculated on a daily basis, with the buyer and seller having to settle the differences on a daily basis.
With the underlying stock price at USD 100, the position is delta hedged, but this doesn't last long. Soon the stock price rises to, say, USD 103. As indicated in Exhibit 4, at that stock price, the position has a slightly negative delta. It is no longer delta hedged.
Here the underlying has risen, but the implied volatility has fallen and that combined with the time decay has produced a small loss for the outright call. The spread has a gain, however, and this is one reason the option spreads can be beneficial, especially when implied volatility is high.
Indicates underlying weakness of a trend
Warning of a possible change in the trend from up to down
Classic Bullish Divergence ...
Learn the underlying theories behind these concepts and what they can mean for your portfolio.
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Since the underlying businesses operate in differing markets, sectors and countries, their quoted prices move independently as supply and demand in them rises and falls and new information is released to the public about the current business situation.
One of the underlying tenets of technical analysis is that historical price levels predict future price levels. Since Forex is a 24-hour market, there tends to be a large amount of data that can be used to gauge future price activity, thereby increasing the statistical significance of the forecast.
Trading an underlying stock against a call or a put when it's not hedged one up. The resulting delta position becomes longer as the stock rises and shorter as the stock falls (positive gamma).
Reading The Lines
Technical chart reading ...
Adware: The Underlying Truth Revealed
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Although the underlying asset price increased less than 17%, your option on that asset increased by 100% or more. That's the leverage that options provide.
Example of underlying securities in HOLDRs
An investor that purchased one lot of telecom HOLDRs would beneficially own the following: ...
Depending on underlying security options can be:
Options on shares;
Options on bonds;
Options on interest rates;
Options on currencies ...
Trading the underlying commodity via an ETF may be 'purer' than trading a resource stock if you want exposure to the movement of that specific commodity.
What's the underlying dynamic in play here? It's the obvious one.. the bulls have their favorite hot spots, and the bears have theirs.
Letter of Credit Uncovered call Uncovered call writing Uncovered options Uncovered put Uncovered Put writing Undecillion Under the belt Underbanked Underbooked Undercapitalized Underfunded pension plan Underinvestment problem Underlying ...
Binary, or Binary options trading platform - a web-based, over-the-counter, real-time trading arena, which offers non-professional investors a way to profit from correct, short term predictions of some underlying asset (e.g., stock, commodity, currency, index) price movement by buying ...
So every derivative will be derived from an underlying asset. If the value of the underlying asset changes, the value of the derivative also changes accordingly. Usually, the underlying assets will be stocks, indices, commodities like gold, silver etc.
Study of basic, underlying factors that will affect the supply and demand of the security being traded. Fundamental analysis looks at the cause of market movement, while technical analysis studies the effect in the form of price action. See also: Technical Analysis, Econom
Trade Deficit ...
An option whose underlying asset is the common stock of a corporation.
Stock Option ...
Core Principles Underlying the Regulation of U.S. Investment Companies
Appendix B: Significant Events in Fund History
The value of the underlying asset(Δ, Delta)
Second derivative w.r.t. the value of the underlying asset(Γ, Gamma)
Present time (Θ, Theta)
Interest rate (ρ, rho)
Volatility (Ѵ Vega)
Volatility and underlying assets (Vanna)
Second derivative w.r.t.
The price of the underlying security an option owner can buy or sell at.
A level where price seems to run into too much demand so price stalls and possibly reverse up.
The price of the underlying stock: as the stock goes up, the price of a call option increases and that of a put option decreases. The reverse is true when the stock goes down. The RATE of this change is measured by a Greek symbol called DELTA.
Although different underlying assets may trade at various times throughout the day - some even trading on 24-hour markets - there are certain periods where activity may be more or less advantageous for particular traders.
The removal of the underlying trend in price. One method of detrending prices is to subtract price from its average and represent the result around a zero line.
To make note of any underlying trends, the moving averages of a security are charted over a prolonged time period. This is begun by calculating the average closing price of a stock for a given number of days, say 10.
A process to buy an underlying asset with cash for only a part of the total price.
Forex Market Terms ...
You will learn: Underlying techniques for effective money management
Intro to Money Management
Trade diversification and risk management strategies
Trade timing tactics
Summary of the money management ...
See also: What is the meaning of Market, Trading, Stock, Option, Options?