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Agency crosses

Agency Cross Trade. Involves an agency broker - one who acts solely as an agent - buying shares from one party and passing them on to one or more buyers at the same price. The brokers make their profit from commission.

 

American option

An option which is exercisable at any time during its life.

 

Arbitrage

Instruments that have identical characteristics and so are perfect substitutes should trade at the same price. If they do not, a risk-free profit can be generated by simultaneously selling the higher-priced asset and buying the lower priced asset. Arbitrage is the identification and exploitation of such price anomalies.

 

Assignment

Notice sent by the clearing house to the option writer informing him that the option has been exercised.

 

Ask / Offer price

The price at which a trader or market maker is willing to sell a contract.

 

At-the-money option (ATM option)

The option with the exercise price closest to the current price of the underlying instrument.

 

Automated trading system

Screen-based trading system, facilitating a market in which participants can come together to buy and sell securities.

 

Autoquote

A computer system which continuously calculates theoretical option prices using models developed jointly by LIFFE and market participants. LIFFE disseminates Autoquote prices for most financial, equity and index option series.

 

Average daily volume (ADV)

See Volume.