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    Underlying Security

    Definition of Underlying Security

    The underlying security, or underlier, is a specific security, commodity, or other financial instrument that is represented by an options or derivative contract. The owner of the derivative has the right to buy or sell the underlying security at a predetermined strike price before options expiration.

    Index options, index futures contracts, and even exchanged traded funds (ETFs) are exempt from this definition since the underlying security cannot be delivered; therefore, they are automatically settled in cash at expiration.

    The price of the underlying is the most significant factor in determining the price of an option contract.

    Tim Ord
    Ord Oracle

    Tim Ord is a technical analyst and expert in the theories of chart analysis using price, volume, and a host of proprietary indicators as a guide...

    Tradingsim.com
    Day Trading Simulator

    Tradingsim.com provides the ability to simulate day trading 24 hours a day from anywhere in the world. TradingSim provides tick by tick data for...

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