Glossary of Terms.

Valuation
The placing of a value or worth on an asset. Real estate and bonds are given valuations by analysts who recommend whether the asset is worth buying or selling at the current price.

Value-Weighted Index
A market average such as Standard & Poor's 500 Index that takes into account the market value of each security rather than calculating a straight price average.

Vertical Spread
A spread in which one option is bought and one option is sold, where the options are of the same type, have the same underlying, and have the same expiration date, but have different strike prices.

Volatility
Measure of the magnitude of price or yield changes over a predefined period of time. A primary determinant in the valuation of options. There are two types of volatility: historical and implied.

Volatility (Options)
Measure of the amount by which an underlying is expected to fluctuate in a given period of time. Volatility is used as a primary determinant in the valuation of options premiums and time value. There are two basic kinds of volatility: implied and historical (statistical). Implied volatility is calculated by using an option-pricing model (Black-Scholes for stocks and indices and Black for futures). Historical volatility is calculated by using the standard deviation of underlying asset price changes from close to close trading going back 21 to 23 days.

Witching Day
A day on which two or more related classes of options and futures expire.

Working Capital
In a narrow sense, defined as the difference between a firm's current assets and its current liabilities. More broadly, working capital encompasses both a firm's current assets and liabilities, and working-capital management is concerned with the management of current assets and liabilities.

Writer
An individual who sells an option.

Yield
The rate of return on an investment, usually expressed as an annual percentage rate.