Under water

In options trading, underwater refers to an exercise price that is more than the current market value of the underlying security. This status does not benefit the holder of the option because there is no profit to be made. If the current market value of the underlying security is at $90 the option is under water if its exercise price is $100. This means it costs more to buy the underlying security as stated on the contract which is $100 compared to just buying it off the market at its current price of $90.

Stocks | Forex | Options | Economics | Bonds | History | Language learning | Technology | Technical Analysis | Fundamental Analysis
Copyright © 2014 econtrader | Risk disclosure | Terms of Use