Options Trading Glossary

Master options trading terminology with our comprehensive glossary.36+ terms explained with definitions, examples, and formulas.

📚36 Terms

📊7 Categories

💡With Examples

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

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Options Basics

Fundamental concepts every options trader should know

Call Option Put Option Strike Price Expiration Date+6 more

The Greeks

Risk metrics that measure option sensitivity

Delta (Δ)Gamma (Γ)Theta (Θ)Vega (ν)+1 more

Trading Strategies

Popular options trading strategies explained

Covered Call Cash-Secured Put Iron Condor Straddle+5 more

Volatility

Understanding implied and historical volatility

Implied Volatility (IV)IV Rank (IVR)IV Percentile (IVP)Historical Volatility (HV)+2 more

Options Pricing

How options are valued and priced

Premium Intrinsic Value Extrinsic Value Black-Scholes Model

Metrics & Analysis

Key metrics for analyzing options

Open Interest Options Flow

All Terms A-Z

At-the-Money (ATM)

An option with a strike price equal or very close to the current stock price.

Assignment

When an option seller is required to fulfill their contract obligation.

Butterfly Spread

A three-strike strategy with limited risk that profits at a specific price.

Black-Scholes Model

The foundational mathematical model for pricing European options.

Call Option

A contract giving the holder the right to buy a stock at a specified price before expiration.

Covered Call

Selling a call option while owning the underlying shares.

Cash-Secured Put

Selling a put option while holding enough cash to buy shares if assigned.

Calendar Spread

Buying and selling options at the same strike but different expirations.

Delta (Δ)

Measures how much an option price changes for a $1 move in the underlying.

Expiration Date

The last day an option can be exercised or traded.

Extrinsic Value

The time and volatility component of an option's price.

Expected Move

The predicted price range based on implied volatility.

Gamma (Γ)

Measures how fast delta changes as the underlying moves.

Historical Volatility (HV)

The actual measured volatility of an asset's past price movements.

Implied Volatility (IV)

The market's expectation of future price movement derived from option prices.

IV Rank (IVR)

Shows where current IV sits within its 52-week range as a percentage.

IV Percentile (IVP)

Shows the percentage of days over the past year that IV was lower than today.

IV Crush

A sharp drop in implied volatility after an event like earnings.

Iron Condor

A four-leg neutral strategy that profits when a stock stays within a range.

In-the-Money (ITM)

An option with intrinsic value - the stock has passed the strike price.

Intrinsic Value

The real, tangible value of an in-the-money option.

LEAPS

Long-term options with expiration dates over one year out.

Out-of-the-Money (OTM)

An option with no intrinsic value - the stock hasn't reached the strike price.

Open Interest

The total number of outstanding option contracts at a given strike.

Options Flow

Real-time tracking of large option orders to identify institutional activity.

Put Option

A contract giving the holder the right to sell a stock at a specified price before expiration.

Premium

The price paid to purchase an option contract.

Rho (ρ)

Measures option sensitivity to changes in interest rates.

Strike Price

The predetermined price at which an option can be exercised.

Straddle

Buying both a call and put at the same strike price to profit from large moves.

Strangle

Buying a call and put at different strike prices to profit from large moves.

Theta (Θ)

Measures how much an option loses value each day from time decay.

Vega (ν)

Measures how much an option price changes with a 1% change in implied volatility.

Vertical Spread

Buying and selling options at different strikes with the same expiration.

Wheel Strategy

A systematic approach cycling between cash-secured puts and covered calls.

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