The term contingency order refers to trades that are only executed if one or more conditions are satisfied. Contingency orders can include conditions such as the price of a security or the execution of another order.
Explanation
While brokerage houses are not required to accept contingency orders, there are brokers that offer this service. These offers are typically structured as a good-til-canceled (GTC) or day order that is executed only if certain conditions are met. An investor looking to sell a security at a certain price point, and use those funds to purchase another security, can use a contingency order to execute this strategy.
Stop-loss orders are one type of contingency order, since it's not a market order until the stock reaches a certain price point. Multi-contingent orders require more than one condition to be satisfied before the order is executed. Contingency orders may involve a specific price point, a change in price, or even trading volume. For example, a market sell order might be executed if a security's price hits a 52-week high.
The term option cycle refers to three patterns that dictate when a commodity, currency, debt, index or equity option will expire. Rules established by the Chicago Board Options Exchange (CBOE) require each of these underlying assets to have four expiration months.
The term contract size refers to the deliverable quantity of a commodity or security named as the underlying asset in a futures or options contract. The deliverable quantity, and therefore the contract size, for futures and options contracts are standardized but vary according to the underlying asset.
The term condor spread refers to an options strategy involving four calls with different strike prices and the same expiration date and underlying security. Condor spreads are considered a limited-risk trading strategy that allows investors to profit when the underlying security is considered non-volatile.
The term combination refers to an options strategy involving trades that take a position in both call and put options for the same underlying security. Option combinations allow investors to construct trades that balance risk and reward with their risk profile.