Underlying
Definition · Level 1 · Options basics
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The asset a derivative is written on and whose price drives its value: a stock, ETF, index or futures contract. It is what gets delivered, or used to compute the cash, at exercise.
Example
For an AAPL 200 call it’s Apple stock; for SPX options it’s the S&P 500 index.
Where Tradecraft teaches it
Level 1 · Options basics, in the lesson “Options: rights, obligations & the ×100”: Calls, puts, holders, writers, premium, strike, expiry — and why 2.35 means $235.
Related terms
- CallContract giving the holder the right to BUY the underlying at the strike by expiration; all else equal, it gains value as the stock rises.
- Contract multiplierThe number of shares one standard US equity option controls — 100 — so a per-share quote must be multiplied by 100 for dollars.
- Holder (long)The buyer of an option: pays the premium, owns the right and decides whether to exercise.
- OptionA contract giving its buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed price up to (or, for European style…
- PremiumThe price of an option, quoted per share; the buyer pays it up front and the seller keeps it whatever happens next (though the seller can lose far…
- PutContract giving the holder the right to SELL the underlying at the strike by expiration; all else equal, it gains value as the stock falls.