Translating the Lingo of Options

Options traders sometimes use a unique vocabulary. To outsiders, the expressions, terms and analogies might make some options folks seem like they're from another planet. Have you ever heard traders talk about a leg plant, the Vixen, vols or the Qs and wondered what the heck they were talking about? To help newer traders make sense of some of these expressions, let's define some of the more frequently used options-related jargon.

The Leg Plant: This one sounds painful, and it often is. It refers to the process of moving into a complex trade one side at a time. For example, say you decide to buy a put and call with the same strike prices and the same expiration dates on the same stock. This, of course, is a straddle. Rather than establishing the trade as one transaction, however, you decide to buy the call first because you strongly believe the stock is going to move higher in the short term. In this case, you are planting a leg. You will plant the other leg when you buy the second part of the straddle, which is the put. By planting a leg, strategists are trying to establish a complex trade at a better price. Many times, however, the stock will move against the trader and defeat the entire purpose of a complex trade like the straddle.

The CBOE: Sometimes called the "see-bo," the Chicago Board Options Exchange is the first and largest U.S.-based options exchange. ...