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Options Trading Terms: P

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PACIFIC EXCHANGE (PCX):

Located in San Francisco, the PCX is one of four U.S. exchanges that trade equity options.

PARITY:

A term used to describe an in-the-money option when the option's total premium is equal to its intrinsic value. Such an option moves 1 point for every 1 point move in the underlying stock, and is said to be "worth parity" or "trading for parity".

PARTIAL FILL:

A limit order that is only partially executed because the total specified number of shares of stock or options could not be bought or sold at the limit price.

PAYABLE DATE:

Date on which the dividend on a stock is actually paid to shareholders of record. Compare to ex-dividend date and record date.

PHILADELPHIA STOCK EXCHANGE (PHLX):

Located in Philadelphia, the PHLX is one of four U.S. exchanges that trade equity options.

PIN RISK:

The risk to a trader who is short an option that, at expiration, the underlying stock price is equal to (or "pinned to") the short option's strike price. If this happens, he will not know whether he will be assigned on his short option. The risk is that the trader doesn't know if he will have no stock position, a short stock position (if he was short a call), or a long stock position (if he was short a put) on the Monday following expiration and thus be subject to an adverse price move in the stock.

PLUS TICK or UP TICK:

A term used to describe a trade made at a price higher than the preceding trade.

PLUS TICK RULE:

SEC regulation governing the market price at which a short sale may be made. Meaning, no short sale may be executed at a price below the price of the last sale. See also down tick or minus tick.

POINT:

The minimum change in the handle of a stock or option price. For stock or options in the U.S., a point means $1. If the price of an option goes from $2.00 to $7.00, it has risen 5 points.

POSITION:

Long or short stock or options in an account.

POSITION LIMIT:

For a single trader, customer, or firm, the maximum number of allowable open option contracts on the same underlying stock. The limits are established by the exchanges.

POSITION TRADING:

Establishing a position in stocks or options and holding it for an extended period of time. Compare to day trading.

PREFERRED STOCK:

A class of stock (as distinguished from common stock) with a claim on a company's earnings before dividends may be made on the common stock. Preferred stock usually has priority over common stock if the company is liquidated.

PREMIUM:

The price of an option.

PRIME RATE:

The lowest interest rate commercial banks charge their largest and most credit-worthy corporate customers.

PUT OPTION:

A put option gives the buyer of the put the right, but not the obligation, to sell the underlying stock at the option's strike price. The seller of the put is obligated to take delivery of (buy) the underlying stock at the option's strike price to the buyer of the put when the buyer exercises his right.

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