Gamma Scalping
Gamma Scalping is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Options Glossary
Options Glossary
Plain-English definitions for options trading terms, Greeks, volatility metrics, and common strategy concepts.
Categories
Advanced Terms
13Volatility Arbitrage
Volatility Arbitrage is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Dispersion Trading
Dispersion Trading is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Dealer Hedging
Dealer Hedging is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Gamma Squeeze
Gamma Squeeze is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Short Gamma
Short Gamma is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Long Gamma
Long Gamma is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Skew Trading
Skew Trading is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Synthetic Long Stock
Synthetic Long Stock is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Synthetic Short Stock
Synthetic Short Stock is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Box Spread
Box Spread is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Ratio Spread
Ratio Spread is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Backspread
Backspread is an advanced options concept best studied after understanding basic pricing, Greeks, and risk.
Beginner-Specific Terms
9Paper Trading
Paper trading is simulated trading used to practice process and mechanics without real capital.
Risk Tolerance
Risk tolerance is the amount of uncertainty, drawdown, or loss a trader can realistically handle.
Trade Thesis
A trade thesis is the reasoned market view behind a position, including what would prove the idea wrong.
Exit Plan
An exit plan defines when and why a trader will close, adjust, or abandon a position.
Trade Journal
A trade journal records thesis, entry, exit, sizing, emotions, mistakes, and lessons learned.
Emotional Trading
Emotional Trading is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Overtrading
Overtrading is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
FOMO
FOMO is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Position Management
Position Management is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Common Strategies
21Covered Call
A covered call combines long stock with a short call sold against those shares.
Cash-Secured Put
A cash-secured put sells a put while reserving enough cash to buy shares if assigned.
Protective Put
A protective put buys put protection against shares the trader already owns.
Long Call
Long Call is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Long Put
Long Put is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Vertical Spread
A vertical spread buys and sells options of the same type and expiration at different strike prices.
Bull Call Spread
Bull Call Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Bear Put Spread
Bear Put Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Credit Spread
Credit Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Debit Spread
Debit Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Iron Condor
An iron condor is a defined-risk neutral strategy using a short call spread and a short put spread.
Iron Butterfly
Iron Butterfly is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Butterfly Spread
Butterfly Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Calendar Spread
Calendar Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Diagonal Spread
Diagonal Spread is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Straddle
Straddle is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Strangle
Strangle is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Collar
Collar is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Wheel Strategy
The wheel strategy cycles between cash-secured puts, possible stock assignment, and covered calls.
Poor Man's Covered Call
Poor Man's Covered Call is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Synthetic Position
Synthetic Position is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Core Options Terms
18Option
A contract that gives the buyer specific rights tied to an underlying asset, usually at a set strike price and expiration date.
Call Option
A call option gives the buyer the right to buy the underlying asset at the strike price before or at expiration.
Put Option
A put option gives the buyer the right to sell the underlying asset at the strike price before or at expiration.
Strike Price
The strike price is the contract price where an option can be exercised and where moneyness is measured.
Expiration Date
The expiration date is the deadline when an option contract stops trading and either has value, is exercised, assigned, or expires worthless.
Premium
Premium is the price paid by the option buyer and received by the option seller for the contract.
Contract
Contract is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Underlying Asset
Underlying Asset is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Exercise
Exercise is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Assignment
Assignment happens when an option seller is required to fulfill the contract obligation after an option is exercised.
Expire Worthless
Expire Worthless is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Intrinsic Value
Intrinsic value is the real in-the-money value of an option based on the stock price and strike price.
Extrinsic Value
Extrinsic value is the portion of an option's price tied to time, volatility, and uncertainty rather than intrinsic value.
Time Value
Time value is the part of option premium that reflects remaining time before expiration and potential future movement.
Moneyness
Moneyness is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
In-the-Money (ITM)
An in-the-money option has intrinsic value because the strike price is favorable relative to the current underlying price.
At-the-Money (ATM)
An at-the-money option has a strike price near the current underlying price and often carries significant extrinsic value.
Out-of-the-Money (OTM)
An out-of-the-money option has no intrinsic value and needs additional movement before it becomes in the money.
Event & Market Terms
8Earnings Report
Earnings Report is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Earnings IV Crush
Earnings IV Crush is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Dividend Risk
Dividend Risk is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Ex-Dividend Date
Ex-Dividend Date is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Federal Reserve (Fed)
Federal Reserve (Fed) is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
CPI Report
CPI Report is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Economic Event Risk
Economic Event Risk is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Gap Risk
Gap Risk is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Expiration & Assignment Terms
9Early Assignment
Early assignment occurs when an option seller is assigned before expiration.
Pin Risk
Pin risk is the uncertainty that can occur when the underlying price finishes close to a strike at expiration.
Exercise-by-Exception
Exercise-by-Exception is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Expiration Friday
Expiration Friday is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Settlement
Settlement is the process that determines how an option obligation is resolved after exercise or expiration.
Cash Settlement
Cash Settlement is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Physical Settlement
Physical Settlement is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
American-Style Option
American-Style Option is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
European-Style Option
European-Style Option is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Greeks
5Delta
Delta estimates how much an option price may change when the underlying asset moves by $1.
Gamma
Gamma estimates how quickly delta can change as the underlying price moves.
Theta
Theta estimates how much option value may decay as time passes, all else equal.
Vega
Vega estimates how sensitive an option is to changes in implied volatility.
Rho
Rho is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Income Strategy Terms
10Premium Collection
Premium Collection is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Theta Decay
Theta Decay is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Yield Enhancement
Yield Enhancement is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Covered Premium
Covered Premium is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Income Generation
Income Generation is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Rolling Options
Rolling Options is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Roll Up
Roll Up is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Roll Down
Roll Down is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Roll Forward
Roll Forward is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Roll Out
Roll Out is an options strategy concept used to structure market exposure, risk, reward, or income potential.
Options Chain Terms
11Options Chain
An options chain is the table of available option contracts, including strikes, expirations, bid, ask, volume, and open interest.
Open Interest
Open interest is the number of option contracts that remain open from prior trading activity.
Volume
Volume shows how many contracts traded during the current session.
Last Price
Last Price is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Mark Price
Mark Price is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Delta Exposure
Delta Exposure is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Gamma Exposure
Gamma Exposure is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Weekly Options
Weekly options are short-dated contracts that often decay quickly and can carry high gamma sensitivity.
Monthly Options
Monthly Options is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
LEAPS
LEAPS are long-dated options with expirations typically more than one year away.
Expiration Cycle
Expiration Cycle is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Order & Execution Terms
10Market Order
Market Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Limit Order
Limit Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Stop Order
Stop Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Stop Limit Order
Stop Limit Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Day Order
Day Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Good-Til-Cancelled (GTC)
Good-Til-Cancelled (GTC) is an order or execution term that affects how an options trade is entered, filled, or managed.
Fill or Kill (FOK)
Fill or Kill (FOK) is an order or execution term that affects how an options trade is entered, filled, or managed.
Partial Fill
Partial Fill is an order or execution term that affects how an options trade is entered, filled, or managed.
Legging In
Legging In is an order or execution term that affects how an options trade is entered, filled, or managed.
Multi-Leg Order
Multi-Leg Order is an order or execution term that affects how an options trade is entered, filled, or managed.
Pricing & Risk Terms
16Breakeven Price
The breakeven price is the underlying price where an options position would theoretically stop losing and start making money at expiration.
Max Profit
Max profit is the highest theoretical gain a defined options position can produce.
Max Loss
Max loss is the largest theoretical loss a defined options position can produce.
Probability of Profit (POP)
Probability of Profit (POP) is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Risk/Reward Ratio
Risk/Reward Ratio is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Buying Power
Buying Power is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Margin
Margin is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Leverage
Leverage is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Capital Efficiency
Capital Efficiency is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Liquidity
Liquidity describes how easily a contract can be entered or exited without poor pricing or excessive friction.
Slippage
Slippage is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Bid Price
The bid price is the highest current price a buyer is willing to pay for an option.
Ask Price
The ask price is the lowest current price a seller is willing to accept for an option.
Bid-Ask Spread
The bid-ask spread is the difference between the bid and ask and represents transaction friction.
Mid Price
Mid Price is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Fill Price
Fill Price is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Probability & Statistics Terms
10Standard Deviation
Standard Deviation is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Probability Cone
Probability Cone is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Expected Value
Expected Value is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Statistical Edge
Statistical Edge is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Win Rate
Win Rate is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Expected Return
Expected Return is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Mean Reversion
Mean Reversion is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Momentum
Momentum is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Volatility Skew
Volatility Skew is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Volatility Smile
Volatility Smile is an options term used to describe contract structure, pricing, risk, execution, or portfolio exposure.
Risk & Portfolio Terms
14Portfolio Hedging
Portfolio Hedging is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Position Sizing
Position sizing determines how much capital or risk is allocated to a trade.
Diversification
Diversification is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Correlation
Correlation is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Tail Risk
Tail Risk is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Drawdown
Drawdown is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Unrealized P/L
Unrealized P/L is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Realized P/L
Realized P/L is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Portfolio Exposure
Portfolio Exposure is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Directional Exposure
Directional Exposure is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Delta Neutral
Delta Neutral is a risk or pricing term used to evaluate exposure, capital use, or trade quality.
Risk Management
Risk management is the process of limiting position size, downside, and avoidable errors before and during a trade.
Defined Risk
Defined risk means the maximum theoretical loss is known before entering the trade.
Undefined Risk
Undefined risk means the position can lose more than a fixed planned amount and may have very large downside.
Technical & Chart Terms
10Support
Support is a chart or technical-analysis concept some traders use to frame market context.
Resistance
Resistance is a chart or technical-analysis concept some traders use to frame market context.
Breakout
Breakout is a chart or technical-analysis concept some traders use to frame market context.
Trend
Trend is a chart or technical-analysis concept some traders use to frame market context.
Consolidation
Consolidation is a chart or technical-analysis concept some traders use to frame market context.
Volume Spike
Volume Spike is a chart or technical-analysis concept some traders use to frame market context.
Relative Strength Index (RSI)
Relative Strength Index (RSI) is a chart or technical-analysis concept some traders use to frame market context.
Moving Average
Moving Average is a chart or technical-analysis concept some traders use to frame market context.
MACD
MACD is a chart or technical-analysis concept some traders use to frame market context.
Bollinger Bands
Bollinger Bands is a chart or technical-analysis concept some traders use to frame market context.
Volatility Terms
9Implied Volatility (IV)
Implied volatility reflects the market's expected future movement embedded in option prices.
Historical Volatility (HV)
Historical volatility measures how much the underlying asset moved in the past.
Realized Volatility
Realized Volatility is a volatility concept used to understand expected movement and option pricing behavior.
IV Rank
IV Rank is a volatility concept used to understand expected movement and option pricing behavior.
IV Percentile
IV Percentile is a volatility concept used to understand expected movement and option pricing behavior.
Volatility Crush
Volatility crush is a fast drop in implied volatility, often after an expected event passes.
Volatility Expansion
Volatility Expansion is a volatility concept used to understand expected movement and option pricing behavior.
Volatility Contraction
Volatility Contraction is a volatility concept used to understand expected movement and option pricing behavior.
Expected Move
Expected move is an estimate of how far the market expects the underlying asset may move over a defined period.