Amanda Stanhaus

Tag: option

Call

A contract that gives a person an option to buy at a specific price within a specific period of time.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Derivative

A contract (really a bet) on an underlying security. Its price is derived from the underlying security.  Futures and options are derivatives.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Future

The guy at the bar gives me his card, I may or may not want to see him again. I have the option of calling him. A future is this except with a price and an expiry date.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Dollar Cost Averaging

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Usually, I like to stand out, not fit in. But there is an exception.

Dollar cost averaging is the one scenario where I like to be average.

(click on the bold-faced vocab words:))

Remember how I have 10% of my income automatically invested. That’s dollar cost averaging.

Each paycheck is the same amount (but I would like it to be more), therefore the amount invested is consistent.

The # of mutual fund shares I buy is determined by the price of the shares and the investment amount.

Since the investment amount is consistent, I automatically buy more shares when the price is low and less shares when the price is high.

It’s really what I’m supposed to do anyway. With this system there is no room for human error. I don’t have an option to get too excited and buy more of the rising stock. Whew, dodged that bullet.

I approve of being average, only when dollar cost averaging.

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(Originally published on Amanda Stanhaus’s financial literacy blog: XO, Bettie.)

Option

The purchaser may want to buy/sell a security at a certain price. Just like when my friend says maybe to plans, she wants to keep her options open for the best deal. P.S. She maybe isn’t my friend.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)

Premium

The amount paid for an option.

(Originally published on Amanda Stanhaus’s financial literacy vocab blog: XO, Bettie Vocab.)