Business, Legal & Accounting Glossary
Also called an underlier, an underlying security is the security upon which certain others (a call or put option, a convertible security, a stock option, a warrant, or stock right) are based. The underlying security must be delivered once the option, convertible, etc. is exercised. Futures and index options are exceptions to this rule, as they do not have an underlying security behind them. Instead, they are settled in cash. For convertibles, the underlying security is in the form of common stock. When a bond or a preferred stock is converted to common stock, the underlying security is delivered to the new owner. Stock options, warrants, and stock rights also have an underlying security in the form of common stock.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Underlying Security are sourced/syndicated and enhanced from:
This glossary post was last updated: 5th February, 2020 | 0 Views.