Introduction to Options and Economic Concepts

These flashcards cover key terms and concepts related to options trading, economic indicators, and financial terminology discussed in the lecture.

Call Option

The right to buy something at a low price.

Put Option

The right to sell something at a high price.

Strike Price

The price at which the buyer of an option can buy/sell the underlying asset.

Max Gain for Seller of a Call

The premium received from selling the call option.

Bullish

Expecting the price of an asset to rise.

Bearish

Expecting the price of an asset to fall.

NAV (Net Asset Value)

The total assets of a mutual fund minus its liabilities, divided by the number of shares outstanding.

POP (Public Offering Price)

The NAV plus the sales charge.

Tax-Free Equivalent Yield

The corporate interest rate times (100% minus the tax bracket of the customer).

Cyclical Stocks

Stocks that do well in expansion periods and poorly in recessions.

Defensive Stocks

Stocks that do not fluctuate much with market changes, generally stable through economic cycles.

Fiscal Policy

Government policy regarding taxation and spending to influence the economy.

Monetary Policy

Actions by the Federal Reserve to influence the money supply and interest rates.

Yield Curve

A graph showing the relationship between interest rates and the maturity of debt.

Trade Deficit

Occurs when imports exceed exports.

Trade Surplus

Occurs when exports exceed imports.

Inflation

The rate at which the general level of prices for goods and services rises.

Spot Rate

The current exchange rate of a currency against the US dollar.

Open Market Operations

The buying and selling of government securities by the Federal Reserve to control the money supply.

Federal Funds Rate

The interest rate at which banks lend money to each other overnight.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers.