Options Trading Glossary
Definitions and explanations of key terms used throughout the platform.
A
Ask Price
The price at which a seller is willing to sell an option. When buying options, you pay the ask price.
The ask is always higher than the bid, and the difference is the bid-ask spread.
At-The-Money (ATM)
An option whose strike price is equal to (or very close to) the current stock price.
ATM options have the highest time value and are most sensitive to price changes.
B
Bid Price
The price at which a buyer is willing to buy an option. When selling options, you receive the bid price.
The bid is always lower than the ask.
Bid-Ask Spread
The difference between the bid and ask prices. Narrow spreads (e.g., $0.05) indicate high liquidity;
wide spreads (e.g., $0.50+) indicate low liquidity and higher trading costs.
C
Call Option
A contract giving you the right (but not obligation) to buy a stock at a specific price
(strike price) before a specific date (expiration). Calls profit when the stock price rises.
Composite Score
Platform-specific metric: A weighted ranking combining expected return, risk score, liquidity, Greeks,
and probability ITM. Higher scores indicate better risk-adjusted opportunities. Used to sort and prioritize opportunities.
D
Delta (Δ)
Measures how much an option's price changes for a $1 move in the underlying stock.
Example: Delta of 0.50 means the option price changes by $0.50 for every $1 stock move.
Call deltas range from 0 to 1; put deltas from -1 to 0.
Days to Expiration (DTE)
The number of calendar days remaining until the option expires. Options lose value as expiration approaches
due to theta decay. Platform shows this for every opportunity.
E
Expected Return
Platform-specific metric: The projected percentage return if the opportunity reaches its target price.
Calculated based on potential profit relative to premium or capital at risk.
Expiration Date
The last day an option contract is valid. After this date, the option either expires worthless or is automatically
exercised if in-the-money. Standard options expire on the third Friday of the month.
Extrinsic Value
The portion of an option's price that is NOT intrinsic value. Includes time value and implied volatility premium.
Extrinsic value decays to zero by expiration.
G
Gamma (Γ)
Measures the rate of change of delta. Shows how much delta will increase or decrease for a $1 move in the stock.
High gamma means delta changes rapidly—important for positions near the strike price.
Greeks
Mathematical measures of an option's sensitivity to various factors: Delta (price), Gamma (delta change),
Theta (time), Vega (volatility), Rho (interest rates). Essential for understanding option behavior and risk.
I
Implied Volatility (IV)
The market's forecast of future stock volatility, derived from option prices. High IV = expensive options;
low IV = cheap options. IV increases before earnings or major events. Measured as an annualized percentage.
In-The-Money (ITM)
A call option where the strike price is below the current stock price, or a put where the strike is above.
ITM options have intrinsic value and are more expensive but have higher probability of profit.
Intrinsic Value
The amount an option is in-the-money. For calls: Stock Price - Strike Price (if positive).
For puts: Strike Price - Stock Price (if positive). Out-of-the-money options have zero intrinsic value.
L
Liquidity
How easily an option can be bought or sold without affecting its price. Measured by volume and open interest.
High liquidity = tight bid-ask spreads and easy execution. Platform filters by minimum liquidity.
Long Position
Owning an option contract (buying a call or put). You pay a premium and have the right to exercise.
Maximum loss is limited to the premium paid.
M
Moneyness
Describes an option's relationship to the stock price: In-The-Money (ITM), At-The-Money (ATM),
or Out-of-The-Money (OTM). Affects probability of profit and pricing.
O
Open Interest
The total number of outstanding option contracts that have not been closed or exercised.
High open interest indicates liquidity and market interest in that strike/expiration.
Out-of-The-Money (OTM)
A call option where the strike price is above the current stock price, or a put where the strike is below.
OTM options have no intrinsic value, only time value. Cheaper but lower probability of profit.
P
Premium
The price you pay to buy an option, or receive when selling. Quoted per share, but contracts cover 100 shares.
Example: Premium of $2.50 = $250 total cost (2.50 × 100).
Probability ITM
Platform-specific metric: The statistical likelihood that an option will finish in-the-money at expiration.
Calculated using current stock price, strike, volatility, and time remaining. Higher probability = safer but lower returns.
Put Option
A contract giving you the right (but not obligation) to sell a stock at a specific price
(strike price) before a specific date (expiration). Puts profit when the stock price falls.
R
Rho (ρ)
Measures an option's sensitivity to interest rate changes. Shows how much the option price changes for a
1% change in interest rates. Generally less important for short-term options.
Risk Score
Platform-specific metric: A composite rating from 0-100 representing overall risk. Considers volatility,
days to expiration, probability ITM, liquidity, and Greeks stability. Lower scores = safer opportunities.
S
Short Position
Selling an option contract you don't own. You receive premium upfront but have the obligation to buy (short put)
or sell (short call) the stock if assigned. Requires margin and has significant risk.
Strike Price
The predetermined price at which an option can be exercised. For calls, the price you can buy the stock;
for puts, the price you can sell. The strike price remains fixed throughout the option's life.
T
Theta (Θ)
Measures time decay—how much value an option loses each day. Always negative for long positions.
Example: Theta of -0.05 means the option loses $5 in value per day (0.05 × 100 shares).
Decay accelerates as expiration approaches.
Time Value
The portion of an option's premium that exceeds its intrinsic value. Represents the potential for the option
to become more profitable before expiration. Time value decays to zero at expiration.
V
Vega (ν)
Measures an option's sensitivity to changes in implied volatility. Shows how much the option price changes
for a 1% change in IV. High vega means option price is very sensitive to volatility changes.
Volume
The number of option contracts traded during the current day. High volume indicates active trading and liquidity.
Compare to open interest to gauge market activity.