Every term used across the strategy guides and Playbook on this site, defined in one place. Where a term has its own in-depth guide, the definition here is short on purpose – follow the link for the full explanation, examples, and diagrams.
A
Adjustment
Any change made to an open options position – rolling, closing part of it, or adding a new leg – in response to how the trade has moved. See Rolling Explained.
American-Style Option
An option that can be exercised at any point before expiration, not only at expiration itself. Most single-stock and ETF options are American-style. See Assignment & Exercise.
Ask
The lowest price a seller is currently willing to accept for a contract. See Reading an Option Chain.
Assignment
What happens to an option seller when the buyer on the other side of the contract exercises it – the seller is now obligated to fulfill the contract’s terms. See Assignment & Exercise.
At the Money (ATM)
A strike price equal, or very close, to the current price of the underlying.
B
Backspread
A ratio spread built with more long contracts than short ones – the reverse ratio of the strategies covered in the ratio spread guide, trading a small, defined debit for potentially large profit on a big move.
Bid
The highest price a buyer is currently willing to pay for a contract. See Reading an Option Chain.
Bid-Ask Spread
The gap between the bid and the ask. A narrow spread generally signals a liquid contract; a wide one signals thinner trading activity.
Black-Scholes Model
A widely used mathematical model for pricing options, taking the stock price, strike, time to expiration, interest rates, and volatility as inputs. Implied volatility is backed out by working the model in reverse from the option’s market price.
Box Spread
A four-leg combination of a call spread and a put spread at the same two strikes, constructed to produce a payoff that behaves like lending or borrowing money rather than a directional or volatility bet.
Breakeven Point
The underlying price at which a position neither profits nor loses at expiration – the point where the payoff line crosses zero.
Broken Wing Butterfly
A butterfly spread with one wing wider than the other, removing risk on one side entirely, usually for a net credit. See the Broken Wing Butterfly guide.
Butterfly Spread
A three-strike, defined-risk structure – buy 1, sell 2, buy 1 – that profits most if the underlying lands near the middle strike at expiration. See Iron Butterfly for the credit-spread version.
C
Calendar Spread
Selling a near-term option and buying a longer-dated one at the same strike, profiting from the difference in time decay between the two. See the Calendar Spread guide.
Call Option
A contract giving the buyer the right to buy the underlying at the strike price. See Long Call & Short Call.
Call Credit Spread
Selling a lower-strike call and buying a higher-strike call, collecting a net credit for a bearish-to-neutral position. See Call Debit & Credit Spread.
Call Debit Spread
Buying a lower-strike call and selling a higher-strike call, paying a net debit for a bullish position with defined risk. See Call Debit & Credit Spread.
Cash Settlement
Settling an exercised option in cash rather than delivering the underlying – the norm for index options, since an index itself can’t be delivered. See Assignment & Exercise.
Charm
A second-order Greek measuring how much Delta changes purely from the passage of time. See The Greeks Explained.
Class of Options
All the option contracts – every strike and expiration – sharing the same underlying and option type (all calls, or all puts, on one stock).
Collar
A protective put and a covered call combined on the same shares, financing the put’s cost with the call’s premium in exchange for capping the upside. See the Collar guide.
Constructive Sale
A US tax concept where certain hedges – including a collar constructed too tightly – can be treated as if the underlying position was sold, potentially triggering tax on unrealized gains without an actual sale. A tax question, not a trading one.
Conversion
A position combining long stock, a short call, and a long put at the same strike, constructed to lock in a small, defined arbitrage-style profit rather than express a market view.
Covered Call
Selling a call against shares already owned, collecting income in exchange for capping the upside. See the Covered Call guide.
Covered Option
A short option backed by an offsetting position – shares for a covered call, or reserved cash for a cash-secured put – removing or reducing the otherwise open-ended risk of a naked position.
Credit Spread
Any spread opened for a net credit – premium received exceeds premium paid – typically used for a range-bound or moderately directional view with defined risk.
D
Debit Spread
Any spread opened for a net debit – premium paid exceeds premium received – typically used for a directional view with lower cost than an outright long option.
Delta
How much an option’s price moves for a $1 move in the underlying; also used as a rough proxy for the probability of finishing in the money. See The Greeks Explained.
Delta-Neutral
A position, or combination of positions, whose net Delta is at or near zero, meaning it’s largely insensitive to small moves in the underlying’s price in either direction.
Diagonal Spread
A spread combining both different strikes and different expirations – a calendar spread with a directional tilt. See the Diagonal Spread guide.
E
Early Assignment
Assignment that occurs before expiration, most common when an option is deep in the money with little extrinsic value left, or ahead of an ex-dividend date on a short call. See Assignment & Exercise.
European-Style Option
An option that can only be exercised at expiration, not before. Most broad-based index options are European-style. See Assignment & Exercise.
Exercise
The action an option buyer takes to use their right to buy (a call) or sell (a put) the underlying at the strike price. See Assignment & Exercise.
Exercise by Exception
The automatic exercise of an option that finishes in the money at expiration, applied by default unless the holder instructs their broker otherwise.
Expiration Cycle
The recurring pattern of expiration dates available for a given underlying – weekly, monthly, or a mix – determining which dates a trader can choose from.
Expiration Date
The date an option contract stops existing, after which it’s either exercised, assigned, or expires worthless.
Extrinsic Value
The portion of an option’s price beyond its intrinsic value – reflecting time remaining and implied volatility. Also called time value; the part of an option’s price that decays as expiration approaches.
F
First Notice Day
The date on which holders of a physically-settled futures contract become at risk of being required to make or take delivery – often before the contract’s technical expiration. See the Futures Options guide.
Futures Option
An option whose underlying is a futures contract rather than a stock or index. Exercising one results in a futures position, not cash or a physical commodity directly. See the Futures Options guide.
G
Gamma
How quickly Delta itself changes as the underlying moves – the source of the “gamma risk near expiration” referenced throughout this site. See The Greeks Explained.
GEX (Gamma Exposure)
An aggregate estimate of options dealers’ hedging pressure at the current price, based on the gamma of all outstanding options on a symbol. See the flow metrics section of the strategies overview, or the live GEX Structure Dashboard for daily put floors, call ceilings and GEX flip levels across SPY, QQQ, IWM, DIA, GLD and IBIT.
GEX Flip
The price level where aggregate dealer gamma exposure crosses from positive to negative, or vice versa – a potential shift between a stabilizing and an amplifying volatility regime. Above this level, market makers dampen price moves; below it, they can amplify them. See the flow metrics section of the strategies overview, or track the daily flip levels for key ETFs on the GEX Structure Dashboard.
H
Historical Volatility
A backward-looking measure of how much a stock has actually moved over some past period, as opposed to implied volatility’s forward-looking estimate. See the Implied Volatility guide.
I
Implied Volatility (IV)
The volatility figure that, plugged into an option pricing model, produces the option’s current market price – the market’s forward-looking estimate of future volatility. See the Implied Volatility guide.
In the Money (ITM)
A strike where exercising the option would have immediate intrinsic value – below the current price for a call, above it for a put.
Intrinsic Value
The portion of an option’s price that reflects only how far in the money it is, ignoring time value entirely.
Iron Butterfly
An iron condor with both short strikes at the same at-the-money price, trading a narrower profit zone for a larger credit. See the Iron Butterfly guide.
Iron Condor
A four-leg, defined-risk strategy combining a put credit spread and a call credit spread, profiting if the underlying stays within a range. See the Iron Condor guide.
IV Percentile
The percentage of trading days in the past year with implied volatility lower than today’s – a distribution-based alternative to IV-Rank. See the IV-Rank section of the strategies overview.
IV Rank
Where current implied volatility sits within a stock’s own 52-week high-low range, expressed as a percentage. See the IV-Rank section of the strategies overview.
J
Jade Lizard
A short put combined with a call credit spread, sized so the total credit covers the call spread’s width, removing risk above the short call strike entirely. See the Jade Lizard guide.
L
Lambda
A measure of an option’s leverage – the percentage change in the option’s price for a 1% change in the underlying, related to but distinct from Delta.
LEAPS
Long-term Equity AnticiPation Securities – options with expirations typically 9 months to 3 years out, used as a capital-efficient stock substitute. See the LEAPS & PMCC guide.
Leg
One individual option contract within a multi-contract position – a two-leg spread has two contracts, a four-leg iron condor has four.
Liquidity
How easily a contract can be bought or sold near its quoted price, generally reflected in tighter bid-ask spreads and higher volume and open interest.
Long Call
Buying a call option – the right to buy the underlying at the strike price. See Long Call & Short Call.
Long Position
Owning a contract or the underlying outright – the buyer’s side of any trade.
Long Put
Buying a put option – the right to sell the underlying at the strike price. See Long Put & Short Put.
M
Margin
Collateral required by a broker to hold certain positions, particularly uncovered short options, reflecting the position’s potential risk.
Mark-to-Market
Revaluing a position to its current market price rather than its original cost – the basis for daily margin calculations, especially on futures positions.
Market Order
An order to buy or sell immediately at the best currently available price, prioritizing speed of execution over price control.
Married Put
A protective put bought on the same day as the underlying stock, which can receive different tax treatment under US rules than a put purchased later. See the Protective Put guide.
Multi-Leg Order
A single order combining two or more option legs, filled together as one transaction rather than as separate trades.
N
Naked Option
A short option with no offsetting position behind it – no shares for a call, no reserved cash for a put – carrying open-ended or very large risk.
Ninety-Ten Strategy
An approach allocating roughly 90% of capital to a low-risk instrument and 10% to long options, capping the total downside while retaining leveraged upside exposure.
O
OCC (Options Clearing Corporation)
The organization that clears and guarantees every listed US options trade, and randomly matches exercises to brokers holding the corresponding short positions. See Assignment & Exercise.
Open Interest
The total number of option contracts currently outstanding for a given strike and expiration, changing only when positions are opened or closed. See Reading an Option Chain.
Option
A contract giving the buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed strike price by a set expiration date.
Out of the Money (OTM)
A strike where exercising the option would have no intrinsic value – above the current price for a call, below it for a put.
P
Payoff Diagram
A chart showing a position’s profit or loss across a range of underlying prices, typically at expiration.
PCR (Put/Call Ratio)
The volume or open interest of puts traded relative to calls on a given symbol – a sentiment gauge best interpreted alongside other flow metrics rather than in isolation. See the flow metrics section of the strategies overview.
Physical Settlement
Settling an exercised option by actually delivering the underlying – real shares for equity options, or a futures position for futures options. See Assignment & Exercise.
Pin Risk
The uncertainty created when a stock closes very close to a strike at expiration, making it unclear until after the close whether the option will be exercised. See Assignment & Exercise.
Poor Man’s Covered Call (PMCC)
A diagonal spread using a deep in-the-money LEAP as a stock substitute, with short-term calls sold against it. See the LEAPS & PMCC guide.
Premium
The price paid or collected for an option contract.
Protective Put
Buying a put against shares already owned, setting a floor below the strike in exchange for the premium paid. See the Protective Put guide.
Put Option
A contract giving the buyer the right to sell the underlying at the strike price. See Long Put & Short Put.
Put Credit Spread
Selling a higher-strike put and buying a lower-strike put, collecting a net credit for a bullish-to-neutral position. See Put Debit & Credit Spread.
Put Debit Spread
Buying a higher-strike put and selling a lower-strike put, paying a net debit for a bearish position with defined risk. See Put Debit & Credit Spread.
Put Pin
A strike price with significant put open interest concentration that can influence dealer hedging behavior. As the underlying approaches a heavily positioned put strike, dealer delta-hedging creates buying pressure that may help stabilize price around that level — a natural support floor. See the daily Put Support Scanner for current put pin levels, and the GEX Structure Dashboard for cross-timeframe confluence across key ETFs.
Put Support
A price zone where concentrated put open interest creates structural buying pressure through dealer hedging — the practical market effect of a put pin. Unlike simple technical support, put support is derived from the options market’s positioning and can be measured and tracked across timeframes. See the daily Put Support Scanner.
R
Ratio Spread
A 1×2 structure – buy 1 option, sell 2 further out – trading a defined profit zone against uncapped or very large risk beyond the short strikes. See the Ratio Spread guide.
Ratio Write
Selling more calls than the number of shares held would fully cover, leaving part of the position naked – a more aggressive variant of a covered call.
Reversal
A position combining short stock, a long call, and a short put at the same strike – the mirror image of a conversion.
Rho
Sensitivity to a change in interest rates – usually the least impactful Greek for short-dated retail strategies. See The Greeks Explained.
Rolling
Closing an existing option position and opening a new one, adjusting the strike, the expiration, or both. See the Rolling Explained guide.
S
Series of Options
All contracts of the same class sharing the same expiration date and strike price.
Short Call
Selling a call option, collecting a premium in exchange for the obligation to sell the underlying if assigned. See Long Call & Short Call.
Short Position
Selling a contract or the underlying without owning it first – the seller’s side of any trade.
Short Put
Selling a put option, collecting a premium in exchange for the obligation to buy the underlying if assigned. See Long Put & Short Put. For setups where open interest concentration and GEX confluence identify natural support levels for short put strikes, see the daily Put Support Scanner.
Standard Deviation
A statistical measure of how spread out a set of values is around its average – the basis for expressing volatility and for Z-scores used throughout options flow analysis.
Straddle
Buying or selling a call and a put at the same strike, betting on a large move (long) or on the underlying staying calm (short). See the Straddle & Strangle guide.
Strangle
Buying or selling a call and a put at different strikes, the wider-strike version of a straddle. See the Straddle & Strangle guide.
Strike Price
The fixed price at which an option’s buyer can buy (call) or sell (put) the underlying.
Sweep
An options order broken up and routed across multiple exchanges simultaneously to fill quickly, generally signaling urgency. See the Reading Options Flow guide.
Synthetic Position
A combination of options (and sometimes stock) constructed to replicate the payoff of a different position – a synthetic long stock position, for example, built from a long call and a short put at the same strike.
T
T+0 Line
The rounded, real-time value curve of a position before expiration, reflecting the extrinsic value still remaining – distinct from the sharp, kinked payoff line that only applies on expiration day itself.
Theta
How much value an option loses per day from time decay, all else equal – the mechanism behind every time-decay-based strategy on this site. See The Greeks Explained.
Time Value
See Extrinsic Value.
V
Vanna
A second-order Greek measuring how much Delta changes as implied volatility changes. See The Greeks Explained.
Vega
How much an option’s price changes for a given change in implied volatility. See The Greeks Explained.
Vera
A less commonly used second-order Greek measuring how much Rho changes as implied volatility changes.
Vertical Spread
Any spread using two different strikes within the same expiration – the umbrella term covering the call and put debit and credit spreads on this site.
Veta
A second-order Greek measuring how much Vega changes as time passes. See The Greeks Explained.
Volatility Skew
The pattern where implied volatility differs across strikes at the same expiration – typically higher for out-of-the-money puts than calls in equities. See the Implied Volatility guide.
Volatility Smile
A more symmetric version of skew, where implied volatility rises on both the put and call sides relative to at-the-money options. See the Implied Volatility guide.
Volume
The number of contracts traded during the current session, resetting to zero each day. See Reading an Option Chain.
Vomma (Volga)
A second-order Greek measuring how much Vega changes as implied volatility changes. See The Greeks Explained.
W
Wash Sale Rule
A US tax rule that can disallow a loss for tax purposes if a substantially similar position is reopened within 30 days of closing a losing one – deferring the loss into the new position’s cost basis instead.
Wheel Strategy
A repeating cycle of cash-secured puts and covered calls on a stock the trader is willing to own. See the Wheel Strategy guide.
Z
Z-Score
How many standard deviations a current reading – GEX, PCR, or otherwise – sits from its own recent average, normalizing very different metrics onto a common “how unusual is this” scale. See the flow metrics section of the strategies overview.