A call option is a contract the gives the buyer the right but not the obligation to buy a specific asset at a specific price, on a specific date of expiry. The value of a call option appreciates if the asset's market price increases.

 

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A ratio spread is a strategy used in options trading, in which a trader will hold an unequal number of buy and sell options positions on a single underlying asset at once.

 

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Rate of return (ROR) is the loss or gain of an investment over a certain period, expressed as a percentage of the initial cost of the investment. A positive ROR means the position has made a profit, while a negative ROR means a loss. You will have a rate of return on any investment you make.

 

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Random walk theory is a financial model that assumes that the stock market moves in a completely unpredictable way. The hypothesis suggests that the future price of each stock is independent of its own historical movement and the price of other securities.

 

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