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Numerical Terms
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L
At The Money - The Strike nearest the current price of the Underlying.
Last Trading Day -
The very last full day of open trading before an options expiration day, usually the third Friday of the expiration month.
LEAPSŪ -
Long-term Equity Anticipation Securities, or LEAPSŪ, are long-term stock or index options. LEAPSŪ, like all options, are available in two types, calls and puts, with expiration dates up to three years in the future.
Leg -
A risk-oriented method of establishing a two-sided position. Rather than entering into a simultaneous transaction to establish the position (a spread, for example), the trader first executes one side of the position, hoping to execute the other side at a later time and a better price. The risk materializes from the fact that a better price may never be available, and a worse price must eventually be accepted.
Letter of Guarantee -
A letter from a bank to a brokerage firm which states that a customer (who has written a call option) does indeed own the underlying stock and the bank will guarantee delivery if the call is assigned. Thus the call can be considered covered. Not all brokerage firms accept letters of guarantee. Also: letter issued to O.C.C. by member firms covering a guarantee of any trades made by one of its customers, (a trader or broker on the exchange floor).
Leverage -
In investments, the attainment of greater percentage profit and risk potential. A call holder has leverage with respect to a stock holder - the former will have greater percentage profits and losses than the latter, for the same movement in the underlying stock.
Limit -
See Trading Limit.
Limit Order -
An order to buy or sell securities at a specified price (the limit). A limit order may also be placed "with discretion". In this case, the floor broker executing the order may use his (her) discretion to buy or sell at a set amount beyond the limit if he (she) feels it is necessary to fill the order.
Listed Option -
A put or call option that is traded on a national options exchange. Listed options have fixed striking prices and expiration dates. See also Over-the-Counter Option.
Local -
A trader on a futures exchange who buys and sells for his own account and may sometimes also fill public orders.
Lognormal Distribution -
A statistical distribution that is often applied to the movement of stock prices. It is a convenient and logical distribution because it implies that stock prices can theoretically rise forever but cannot fall below zero.
Long Position -
A position wherein an investor's interest in a particular series of options is as a net holder (i.e., the number of contracts bought exceeds the number of contracts sold).
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