underlying asset

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Underlying asset

The security or property or loan agreement that an option gives the option holder the right to buy or to sell.

Underlying Asset

In a derivative or warrant, the security, property, or other asset that gives value to the derivative or warrant. For example, in an option giving one the right to buy stock in Johnson and Johnson, the underlying asset is the stock in Johnson and Johnson. An underlying asset may many things, such as a physical commodity, a security, a piece of land, or part of a business.

underlying asset

1. The physical and financial asset to which a security holder or a class of security holders has a claim. An analyst may believe that a stock is underpriced on the basis of the value of the firm's underlying assets and the potential earning power of those assets.
2. The asset that underlies and gives value to a security. The underlying asset of a stock option is the stock that the option can be used to purchase. Likewise, the underlying asset of a convertible bond is the stock for which the bond can be exchanged. The market value of a security is directly affected by changes in the value of any underlying asset into which it may be exchanged.
References in periodicals archive ?
CBOE Holdings anticipates trading in options on Altice USA will begin on Friday, June 30, once the underlying stock has been certified as meeting all of CBOE Holdings' applicable exchanges' listing criteria.
DGCX Single Stock future contracts are designed as Quanto style mini size futures which mirror the prices of the underlying stock in US Dollar terms.
The company said the reverse stock split will affect all issued and outstanding shares of its common stock, as well as common stock underlying stock options, restricted stock units, warrants and preferred stock outstanding immediately prior to the effectiveness of the reverse stock split.
Since the Black-Scholes model assumed that the underlying stock do not pay dividends, dividend yield is not a required variable in the pricing of options back then.
A portion of the warrant will be sold to and exercised by the underwriter, Deutsche Bank Securities, in connection with its sale of the underlying stock.
The dollar amount of the exchangeable debt offer (scaled by total liabilities) is influenced by the underlying stock price run-up and the negative future earnings of the underlying firm even after holding constant the size and investment opportunities of the issuer.
Options to acquire or sell stock or securities are generally included in the definition of stock or securities for purposes of the wash sale rule (see Q 7652); consequently, the sale (at a loss) and reacquisition of options, with or without ownership of the underlying stock, would trigger the wash sale rule.
Unlike sponsored depository receipts, Brazil's DR offering will not be transferable with the underlying stock.
As an option contract is derived from a stock (or index), all factors affecting the value of its underlying stock (or index) influence its value.
A high Put/Call ratio suggests that the investor sentiment is bearish and that investors expect the underlying stock to decrease in value.
Note that it is the option itself that must be tradable, not the underlying stock.