Ask the Institute

Ask the Institute Archive

DATE:  September 04, 2012

QUESTION:

Can you please explain what a proxy is and why it may be important to an options trader?

ANSWER:
A proxy can be defined as a "substitute" or an "almost equal replacement." In the case of trading stocks, that is exactly what a proxy is. It is a substitute for a stock. Proxies are important in the world of options trading because professional options traders almost always hedge their options trades with trades in the underlying stock. To learn more about the term proxy and how it relates to options trading, view this week's segment of "Ask the Institute."

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