Akuna Options 101 Course Notes

  1. Options Terminology
  2. Bid, Offer, Size
  3. Make a market: to provide a bid and ask price and sizes for each.
  4. For example: 60 at 68, 4 by 10.
  5. Spread: The difference between the bid and ask price
  6. Hedge: A trade or investment to reduce the risk of price movement in an asset
  7. Paper: The interested parties trading against a market marker (i.e. Akuna)
  8. Broker: A person or company that acts as an intermediary between buyers and sellers
  9. Tick Size: The increment between one level and the next level. Different products have different tick sizes.
  10. Queue Priority: A structure used to determine the right of precedence between those in the list (Price-time priority)
  11. **Settlement time:**the specific time of days options expire, and futures “settle” for the day. These values are used to calculate daily P&L and mark to market.
  12. ***Contract Size:***The multiplier attached to an option or future. Options on stock generally have a multiplier of 100 shares. Options on futures have a multiplier of 1 future. The multiplier on options on a future and the multiplier on the future can vary.
  13. ***Vol bid, catching a bid, ripping/exploding:***Variety of terms for vol going up.
  14. ***Vol offered, vol smashed/smoked:***Variety of terms for vol going down.
  15. ***Teenie:***lowest priced options. Generally traded for movement risk purposes.
  16. ***Theoretical Value (Theo):***based on all inputs, the current value a market maker believes an option is worth.
  17. ***Sheets (or fair value):***same as above, but generally when referring to where something traded.