Options Trading Glossary

Options expiring on the current trading day, characterized by extremely high theta and gamma, offering high risk and reward.

The cost basis modified for events like stock splits, dividends, return of capital, or options assignments.

Modifying an existing options position by adding, removing, or changing components to manage risk or improve profit potential.

An order that must be executed in its entirety or not at all, preventing partial fills.

A spread with such high transaction costs (commissions and fees) that it "eats" all potential profits; an unprofitable strategy.

An option that can be exercised at any time between the purchase date and the expiration date.

An investment's return scaled to represent the equivalent annual percentage rate, allowing comparison across different time periods.

The simultaneous purchase and sale of securities to profit from price discrepancies with theoretically zero risk.

The lowest price a seller is willing to accept for an option; the price you pay when buying an option.

The obligation imposed on an option writer when the option holder exercises their right, requiring the writer to fulfill the contract terms.

The risk that a short option position will be exercised by the holder, obligating the writer to fulfill the contract terms.

An option whose strike price is equal to or very close to the current price of the underlying asset.

The mean loss amount across all losing trades, helping assess typical loss size and risk management effectiveness.

The mean profit amount across all winning trades, helping assess typical profitable trade size.

Another term for ratio backspread; more long options than short options, typically for a small debit or credit.

The process of testing a trading strategy using historical data to evaluate how it would have performed in the past.

Selling a call at a lower strike and buying a call at a higher strike (same expiration), a credit spread profiting from neutral to downward price movement.

Buying a put at a higher strike and selling a put at a lower strike (same expiration), profiting from moderate downward price movement with limited risk and reward.

Adjusting the deltas of different positions to a common benchmark (like SPY) to analyze aggregate portfolio risk.

The highest price a buyer is willing to pay for an option; the price you receive when selling an option.

The difference between the bid price and ask price, representing the transaction cost and a measure of liquidity.

An options pricing model using a discrete-time framework that models possible price paths as a tree of potential outcomes.

A mathematical model for pricing European-style options developed in 1973, assuming constant volatility and log-normal distribution of prices.

Using box spreads to exploit pricing inefficiencies or create synthetic loans/deposits at favorable rates.

A combination of a bull call spread and a bear put spread with the same strikes and expiration, used for arbitrage or as a financing tool.

An order with both a profit target and stop loss attached, automatically placed when the entry order fills.

The underlying asset price at which an options position neither makes nor loses money at expiration.

Buying a call at a lower strike and selling a call at a higher strike (same expiration), profiting from moderate upward price movement with limited risk and reward.

Selling a put at a higher strike and buying a put at a lower strike (same expiration), a credit spread profiting from neutral to upward price movement.

A three-strike spread combining a bull spread and a bear spread, profiting from low volatility with the stock finishing at the middle strike.

An order to purchase options contracts to close out an existing short position.

An order to purchase options contracts to establish a new long position.

A time spread using both calls and puts: sell near-term ATM straddle, buy longer-term ATM straddle.

A time spread using OTM options: sell near-term OTM strangle, buy longer-term OTM strangle at same or different strikes.

Selling ATM calls and buying more OTM calls, profiting from significant upward price movement.

A butterfly spread constructed using all call options at three different strike prices (buy 1 low, sell 2 middle, buy 1 high).

A condor spread constructed using all call options at four different strike prices.

An options contract that gives the holder the right to buy 100 shares of the underlying asset at the strike price before or at expiration.

A ratio spread using calls, typically buying fewer ATM calls and selling more OTM calls.

A settlement method where the difference between the strike price and settlement value is paid in cash rather than delivering the underlying asset.

Selling a put option while holding enough cash in your account to purchase the underlying shares if assigned, generating income while potentially acquiring stock at a discount.

A second-order Greek measuring how delta changes with the passage of time, particularly important for weekend risk assessment.

A ratio spread variation with three strikes resembling a Christmas tree shape on a risk graph.

An order to exit or reduce an existing options position, decreasing your position in that option series.

Simultaneously owning stock, buying a protective put, and selling a covered call to limit both downside risk and upside potential while minimizing cost.

A third-order Greek measuring how gamma changes with the passage of time; gamma decay.

An order combining multiple option positions (multi-leg) to be executed simultaneously at a net debit or credit.

A four-strike spread similar to a butterfly but with two different middle strikes, providing a wider profit zone.

An order where one order triggers or cancels based on the execution or conditions of another order.

The number used to calculate the total dollar value of an options contract, typically 100 for equity options (premium × 100 = total cost).

The number of shares of the underlying asset covered by one options contract, standardly 100 shares for equity options.

An arbitrage strategy involving buying stock, buying a put, and selling a call (all at the same strike), used when the synthetic short is overpriced.

An arbitrage strategy exploiting put-call parity violations by creating synthetic positions to lock in risk-free profit.

The degree to which two securities or positions move in relation to each other, ranging from -1 to +1.

The original purchase price of an asset plus any associated costs, used to calculate gains or losses for tax purposes.

The cost of holding a position, including interest on margin, dividends, storage costs, and opportunity cost.

Another term for zero-cost collar; a hedging strategy where the call premium funds the put premium, resulting in no upfront cost.

A strategy where you own 100 shares of stock and sell a call option against those shares, generating income while capping upside potential.

Owning stock and selling both a call and a put (different strikes), similar to a covered strangle but with specific strike selection.

Owning stock while simultaneously selling both an ATM call and an ATM put, collecting significant premium but with risk on both sides.

Owning stock while simultaneously selling an OTM call and an OTM put, collecting premium with wider breakeven points than a covered straddle.

A spread strategy where the premium received from the short option exceeds the premium paid for the long option, resulting in a net credit.

An order that expires automatically if not filled by the end of the trading day on which it was placed.

A spread strategy where the premium paid for the long option exceeds the premium received from the short option, resulting in a net debit.

The date when a company's board of directors announces the next dividend payment, including amount and payment date.

A measure of how much an option's price will change for every $1 change in the underlying asset's price; ranges from 0 to 1 for calls, 0 to -1 for puts.

A risk management strategy that involves taking offsetting positions to maintain a delta-neutral portfolio, reducing directional risk.

A portfolio or position where the total position delta equals zero, meaning the position is not sensitive to small price movements in the underlying.

A financial instrument whose value is derived from the value of an underlying asset, such as stocks, bonds, commodities, or indices.

A spread involving options with different strike prices and different expiration dates, combining aspects of vertical and horizontal spreads.

Trading the difference between index volatility and the weighted average volatility of individual components.

The practice of spreading investments across different securities, strategies, or asset classes to reduce risk.

A strategy of buying stock before the ex-dividend date to receive the dividend, then selling shortly after.

The risk of early assignment on short calls when the dividend exceeds the extrinsic value, as holders may exercise to capture the dividend.

Selling near-term call and put options while buying longer-term call and put options at the same or similar strikes.

A strategy combining two diagonal spreads (call diagonal and put diagonal) for income generation.

A combination of diagonal spreads on both calls and puts, creating a complex income-generating position.

When an option holder exercises their right before the expiration date, forcing the option writer to fulfill their obligation immediately.

A measure of the percentage change in option value per percentage change in the underlying asset's dividend yield.

An option contract where the underlying asset is shares of a specific stock.

An option contract where the underlying asset is an exchange-traded fund that holds a basket of securities.

An option that can only be exercised on the expiration date, not before.

The date on which a stock begins trading without the value of its next dividend payment; buyers on or after this date don't receive the dividend.

The actual price at which an order is filled, which may differ from the quoted price when the order was placed.

The act of invoking the right under an options contract to buy (call) or sell (put) the underlying asset at the strike price.

The risk associated with deciding whether to exercise an option, particularly regarding the timing of that decision.

The value used to determine the cash settlement amount for index options, calculated based on opening or closing prices.

A statistical measure of the average outcome of a trade if it were repeated many times, accounting for probabilities.

The pattern of months in which options on a particular underlying asset expire (e.g., January/April/July/October).

The last day on which an option can be exercised or traded, after which it becomes worthless if not exercised (typically the Saturday following the third Friday of the expiration month).

The third Friday of the expiration month when most monthly equity options expire (or Thursday if Friday is a holiday).

A line on a risk graph showing the profit/loss at various prices specifically at the expiration date.

The calendar month during which an option contract expires and ceases to exist.

The portion of an option's premium that exceeds its intrinsic value, representing the value attributed to time remaining until expiration and implied volatility.

A distribution characteristic where extreme events occur more frequently than predicted by a normal distribution; leads to higher prices for OTM options.

The actual price at which your order was executed and completed in the market.

An order that must be executed immediately in its entirety or be canceled automatically.

The implied volatility expected for a future period, derived from the term structure of volatility.

Another term for ratio spread; more short options than long options, bringing in credit.

A measure of how much delta will change for every $1 change in the underlying asset's price; the rate of change of delta.

A trading strategy that involves adjusting a delta-neutral position by buying or selling the underlying asset as its price changes to maintain neutrality and profit from gamma.

A situation where market makers hedge their gamma exposure, creating self-reinforcing price movements that trap traders.

A mathematical model describing random price movements used as the basis for the Black-Scholes model.

An order that remains active until executed or manually canceled by the trader, surviving multiple trading sessions.

A collective term for the risk measures (delta, gamma, theta, vega, rho) used to assess how different factors affect option prices.

A display showing how the various Greeks (delta, gamma, theta, vega) change across different underlying prices.

The opposite of guts; selling both an ITM call and ITM put for premium collection.

A strategy similar to a straddle but using ITM options instead of ATM options (buy ITM call and ITM put).

A visual representation using colors to display data like volatility, Greeks, or P&L across strikes and expirations.

The ratio of derivatives positions to the underlying asset needed to create a neutral or desired risk exposure.

Second and third-order derivatives (gamma, vanna, volga, speed, zomma, color) that measure how the primary Greeks change.

A statistical measure of the actual volatility of an asset's price over a specific past period, calculated from historical price movements.

The person or entity that purchases an option and has the right, but not obligation, to exercise it.

A spread involving options at the same strike price but different expiration dates, profiting from time decay differential.

An order that executes immediately for all or part of the quantity and cancels any unfilled portion.

The market's forecast of the underlying asset's future volatility, derived from option prices; the volatility value that makes the theoretical option price equal the market price.

The difference in implied volatility between different options, such as calls versus puts or different expiration dates.

A call option where the underlying price is above the strike price, or a put option where the underlying price is below the strike price; has intrinsic value.

An option contract where the underlying asset is a stock market index (like S&P 500 or NASDAQ), typically cash-settled.

The amount of equity required to open a new position, calculated based on the position's risk profile.

The amount by which an option is in-the-money; the difference between the underlying asset's current price and the strike price for ITM options (zero for OTM options).

A wider version of an iron condor with greater distance between strikes, accepting more risk for higher potential profit.

A butterfly spread using both puts and calls: sell ATM call and put, buy OTM call and put at equidistant strikes.

A condor spread using both puts and calls: sell OTM call spread and sell OTM put spread with the same expiration.

The percentage of days in the past year (typically) when implied volatility was lower than the current level.

A measure showing where current implied volatility stands relative to its 52-week high and low, expressed as a percentage (0-100%).

Selling an OTM put and an OTM call spread (without downside risk), typically for a credit greater than the width of the call spread.

A pricing model that incorporates sudden, discontinuous price movements (jumps) in addition to normal continuous price changes.

A statistical measure of the "tailedness" of a probability distribution; positive kurtosis indicates fat tails and more extreme outcomes.

A measure of the percentage change in option value per percentage change in the underlying asset price; also called leverage or elasticity.

The price at which an option last traded, which may not reflect the current bid or ask.

Long-dated options with expiration dates extending up to three years into the future, expiring in January.

Entering a multi-leg strategy one position at a time rather than simultaneously, exposing yourself to market risk between legs.

Exiting a multi-leg strategy one position at a time rather than simultaneously, potentially optimizing exits but adding risk.

The individual option positions that make up a multi-leg spread strategy.

An order to buy or sell at a specific price or better, guaranteeing price but not execution.

An order to be executed at the closing price, but only if that price meets the specified limit.

The ease with which an option can be bought or sold in the market without significantly affecting its price, indicated by volume and tight bid-ask spreads.

An option that is traded on a registered options exchange with standardized terms (strike prices, expiration dates).

Trading with real money in actual markets, as opposed to simulated or paper trading.

A volatility model where implied volatility is a function of both the underlying price and time, used to fit the volatility surface.

A butterfly spread entered for a debit, profiting when the underlying stays near the center strike with limited risk.

Buying a call option with the expectation that the underlying asset's price will rise, providing leveraged upside exposure with limited risk (premium paid).

A condor entered for a debit, profiting when the underlying stays between the two middle strikes.

Buying an iron butterfly (buy ATM call/put, sell OTM call/put) for a debit, profiting from high volatility.

Buying an iron condor (buy the spreads) for a debit, profiting from high volatility.

Owning an asset or option with the expectation that it will increase in value; the buyer's position in an options contract.

Buying a put option with the expectation that the underlying asset's price will fall, providing leveraged downside exposure with limited risk (premium paid).

Simply owning shares of stock with unlimited upside potential and downside risk to zero.

Buying both an ATM call and ATM put, profiting from large price movements in either direction regardless of direction.

Buying an OTM call and OTM put, profiting from large price movements in either direction; cheaper than a straddle but requires larger moves.

The percentage of trades that result in losses, calculated as (number of losing trades / total trades) × 100.

The minimum equity that must be maintained in an account to keep positions open; falling below triggers a margin call.

A broker's demand that an investor deposit additional money or securities to bring the account up to the minimum maintenance margin.

The amount of cash or securities required in your account to enter or maintain certain options positions.

An order to buy or sell immediately at the best available current price, guaranteeing execution but not price.

An order to be executed at or near the market's closing price during the closing auction.

The greatest possible loss from an options position, either at expiration or at any point during the trade.

The greatest possible profit achievable from an options position, typically defined at expiration under optimal conditions.

Variations of the wheel strategy incorporating different strike selections, timing, or adjustments based on market conditions.

A description of the relationship between an option's strike price and the underlying asset's current price (ITM, ATM, or OTM).

A computational method using random sampling to model possible option price paths and calculate theoretical values.

Standard options contracts that expire on the third Friday of each month (or Thursday if Friday is a holiday).

An order involving two or more option contracts to be executed together as a single transaction at a net price.

Selling a call option without owning the underlying stock, exposing the seller to theoretically unlimited risk if the stock price rises significantly.

Selling a put option without holding a short position in the underlying stock, exposing the seller to significant risk if the stock price falls.

Two orders where the execution of one automatically cancels the other, used for profit targets and stop losses.

An order where the execution of one order triggers the placement of another order.

The total number of outstanding option contracts that have been opened but not yet closed, exercised, or expired.

An order to initiate a new options position, increasing your position in that option series.

A financial contract that gives the buyer the right, but not the obligation, to buy or sell an underlying asset at a specified price on or before a specific date.

Sophisticated tools and calculations for analyzing options positions, including theoretical pricing, risk metrics, and scenario analysis.

Tiered authorization levels set by brokers restricting which strategies traders can execute based on experience, knowledge, and account size (typically Levels 0-5).

A comprehensive listing of all available option contracts for a specific underlying asset, organized by expiration date and strike price.

All option contracts of the same class (calls or puts) with the same underlying asset, strike price, and expiration date.

A customized option traded directly between two parties, not on an exchange, with negotiable terms.

A call option where the underlying price is below the strike price, or a put option where the underlying price is above the strike price; has no intrinsic value.

Simulated trading without real money to practice strategies and gain experience without financial risk.

The date when the company actually distributes dividend payments to shareholders of record.

A graphical representation showing the profit or loss of an options position at various underlying prices at expiration.

A settlement method where the actual underlying asset (shares) is delivered when an option is exercised.

The risk near expiration that the underlying will close exactly at or very near a strike price, creating uncertainty about assignment.

A measure of a portfolio's sensitivity to market movements, combining individual position betas.

A risk-based margin system that calculates requirements based on the overall portfolio risk rather than individual position rules.

The total delta exposure of an entire options position or portfolio, combining the deltas of all individual positions.

The total gamma exposure of an entire options position or portfolio, indicating overall sensitivity to price changes.

Determining the appropriate number of contracts or amount of capital to allocate to each trade based on risk parameters.

The total theta exposure of an entire options position or portfolio, showing total daily time decay.

The price paid by the option buyer to the option seller for the rights conveyed by the option contract, quoted per share but paid per contract (100 shares).

An estimate of the likelihood that an options position will be profitable at expiration, often based on delta.

The net gain or loss from a trading position or portfolio, calculated as the difference between entry and exit values.

A predetermined price level at which a trader plans to exit a position to realize gains.

Another term for collar strategy; using options to create a defined range of potential outcomes for a stock position.

A strategy where you own stock and buy a put option to protect against downside risk, creating a price floor below which losses are limited.

Selling ATM puts and buying more OTM puts, profiting from significant downward price movement.

A butterfly spread constructed using all put options at three different strike prices (buy 1 high, sell 2 middle, buy 1 low).

A condor spread constructed using all put options at four different strike prices.

An options contract that gives the holder the right to sell 100 shares of the underlying asset at the strike price before or at expiration.

A ratio spread using puts, typically buying fewer ATM puts and selling more OTM puts.

An advanced collar combining a covered call with a put spread (long put at higher strike, short put at lower strike) for partial downside protection with less cost.

A principle defining the relationship between the price of European put and call options with the same strike and expiration, preventing arbitrage.

Options contracts that expire at the end of each quarter (March, June, September, December).

A spread where you sell fewer near-the-money options and buy more out-of-the-money options, profiting from large moves.

A spread with an unequal number of long and short options, such as buying 1 call and selling 2 calls at a higher strike.

Selling more call options than the number of shares owned (e.g., own 100 shares, sell 2 calls), increasing income but adding unlimited upside risk.

The actual profit or loss from closed positions, representing money actually gained or lost.

The actual volatility experienced by an asset over a specific period, measured after the fact using actual price movements.

The date when a company determines which shareholders are eligible to receive the upcoming dividend payment.

Regulation T margin requirements set by the Federal Reserve, using standardized rules for different option strategies.

A percentage measure of profitability calculated as (profit/initial investment) × 100.

An arbitrage strategy involving selling stock short, selling a put, and buying a call (all at the same strike), used when the synthetic long is overpriced.

The opposite of conversion arbitrage; exploiting put-call parity when the synthetic long stock is overpriced relative to actual stock.

The opposite position of an iron albatross, profiting from extreme volatility.

The opposite of an iron condor; buying the inner spreads and selling the outer spreads, profiting from high volatility.

A measure of how much an option's price will change for every 1% change in interest rates; more significant for longer-dated options.

An arbitrage strategy involving corporate actions like mergers, acquisitions, or restructurings, carrying some execution risk.

A comprehensive chart showing profit/loss at different prices and potentially different points in time, not just at expiration.

A pricing approach assuming investors are indifferent to risk, simplifying option pricing by using the risk-free rate.

The theoretical rate of return on an investment with zero risk, typically using U.S. Treasury bills as a proxy in option pricing models.

The relationship between the potential maximum loss and maximum profit of a trade, used to evaluate trade quality.

Closing an option position and reopening at a lower strike price, typically to adjust for downward price movement.

Closing an option position and reopening with a nearer expiration date, less common than rolling out.

Closing an option position and reopening with a later expiration date, extending the time horizon of the position.

Closing an option position and reopening at a higher strike price, typically to lock in profits or adjust for price movement.

Closing an existing option position and simultaneously opening a new position with different strike price, expiration, or both.

Closing an existing option position and simultaneously opening a new position with different terms (strike, expiration).

An order to sell options contracts to close out an existing long position.

An order to sell options contracts to establish a new short position (writing options).

The process of fulfilling the obligations of an options contract, either through cash payment or delivery of the underlying asset.

A measure of risk-adjusted return, calculated as (return - risk-free rate) / standard deviation of returns.

A butterfly spread entered for a credit, profiting when the underlying moves significantly away from the center strike.

Selling a call option to collect premium, with the obligation to sell shares at the strike price if assigned; profits from time decay and price stability or decline.

A condor entered for a credit, profiting when the underlying moves outside the range of the two middle strikes.

Selling an iron butterfly (sell ATM call/put, buy OTM call/put) for a credit, profiting from low volatility around the center strike.

Selling an iron condor (sell the spreads) for a credit, profiting from low volatility and neutral price action.

Selling an asset or option that you don't own or selling an option to open a position, with the expectation that it will decrease in value.

Selling a put option to collect premium, with the obligation to buy shares at the strike price if assigned; profits from time decay and price stability or increase.

Borrowing and selling shares with the expectation of buying them back at a lower price; unlimited upside risk and profit limited to the initial sale price.

Selling both an ATM call and ATM put, collecting premium and profiting when the underlying stays near the strike price; unlimited risk.

Selling an OTM call and OTM put, collecting premium and profiting when the underlying stays within the range; unlimited risk on both sides.

A statistical measure of the asymmetry of a probability distribution; negative skewness indicates a distribution tilted toward lower values.

The difference between the expected execution price and the actual execution price, often due to market movement or liquidity issues.

Standard Portfolio Analysis of Risk; a sophisticated margin system that calculates requirements based on worst-case portfolio loss scenarios.

A third-order Greek measuring the rate of change in gamma with respect to changes in the underlying asset's price.

A multi-leg order specifically for spread strategies, quoted as a single net debit or credit price.

An options contract with standardized terms (100 shares, standard strike intervals) as opposed to adjusted contracts.

Trading strategies using statistical and mathematical models to identify and exploit temporary price inefficiencies.

A volatility model assumption where the implied volatility remains constant for options with the same delta as the underlying price moves.

A volatility model assumption where the implied volatility remains constant for a given strike price as the underlying price moves.

A model assumption that volatility itself changes randomly over time, rather than remaining constant as in Black-Scholes.

A predetermined price level at which a trader will exit a position to limit losses if the trade moves against them.

An order that becomes a market order once the stock reaches a specified stop price, used for limiting losses or protecting profits.

An order that becomes a limit order (not market order) once the stop price is reached, providing price control but risking non-execution.

Buying (long) or selling (short) both a call and put at the same strike price and expiration, betting on volatility or lack thereof.

Buying (long) or selling (short) both an OTM call and OTM put at different strikes with the same expiration.

A volatility strategy buying more calls than puts (typically 2 calls and 1 put), biased toward upward movement.

The predetermined price at which the underlying asset can be bought (call) or sold (put) when the option is exercised.

A volatility strategy buying more puts than calls (typically 2 puts and 1 call), biased toward downward movement.

An aggressive directional spread combining multiple option positions for maximum leverage.

A position created by buying stock and buying a put, which replicates the risk/reward profile of a long call.

A position created by buying a call and selling a put at the same strike and expiration, replicating the P&L of owning stock.

A position created by shorting stock and buying a call, which replicates the risk/reward profile of a long put.

A position created by selling a call and buying a put at the same strike and expiration, replicating the P&L of shorting stock.

A line on a risk graph showing the current profit/loss at today's prices, before time decay or other changes.

A measure of how much an option's value decreases each day as expiration approaches, representing time decay; typically expressed as a negative number.

The daily erosion of an option's extrinsic value due to the passage of time, accelerating as expiration approaches.

The reduction in the value of an option as it approaches its expiration date, assuming all other factors remain constant.

Another term for calendar spread; exploits the different rates of time decay between near-term and longer-term options.

A detailed record of all trades including entry/exit points, rationale, emotions, and outcomes, used for performance analysis and improvement.

The ongoing process of monitoring and adjusting positions after entry to optimize outcomes and manage risk.

An extension of the binomial model allowing three possible price movements (up, down, unchanged) at each time step.

A third-order Greek measuring how vomma changes with changes in volatility; the sensitivity of vomma to volatility changes.

The financial instrument (stock, ETF, index, etc.) on which an options contract is based and derives its value from.

The theoretical profit or loss on open positions based on current market prices, not yet locked in by closing.

A second-order Greek measuring the rate of change in delta relative to changes in implied volatility, or the rate of change in vega relative to changes in the underlying price.

A ratio write where the short calls are at different strike prices, creating a more customized risk/reward profile.

A derivative contract that pays the difference between realized variance and a fixed strike variance, providing pure volatility exposure.

Trading contracts that allow direct exposure to volatility by exchanging fixed variance for realized variance.

A measure of how much an option's price will change for every 1% change in implied volatility of the underlying asset.

A second-order Greek measuring how rho changes with changes in volatility; the sensitivity of rho to volatility.

An options spread involving options of the same type (calls or puts), same expiration, but different strike prices.

The Chicago Board Options Exchange's measure of the market's expectation of 30-day volatility, calculated from S&P 500 index options; known as the "fear gauge."

Trading strategies specifically designed around VIX options or futures to profit from changes in market volatility expectations.

Trading strategies that profit from differences between implied volatility and expected future realized volatility.

A graphical representation showing the range of historical volatility levels over different time periods, used to evaluate current implied volatility.

A rapid decrease in implied volatility, often occurring after an anticipated event (like earnings) passes, causing option values to drop sharply.

The pattern of implied volatilities across different strike prices, typically showing higher IVs for OTM puts in equity markets (downward sloping).

A U-shaped pattern that appears when implied volatilities are plotted against strike prices, showing higher IVs for deep ITM and OTM options.

A volatility pattern specific to equity options where OTM puts have significantly higher implied volatility than OTM calls, creating a downward-sloping curve.

A three-dimensional representation showing how implied volatility varies across both strike prices and expiration dates for all options on an underlying asset.

A forward contract on future realized volatility, where the payout is based on the difference between realized and strike volatility.

The relationship between implied volatility and time to expiration for options at the same strike price, showing how IV changes with maturity.

A second-order Greek measuring how vega changes as implied volatility changes; the sensitivity of vega to volatility.

The total number of option contracts traded during a specific period, typically one trading day.

Options contracts that expire every week, typically on Fridays, offering shorter-term trading opportunities.

A cyclical income strategy: sell cash-secured puts until assigned, then sell covered calls until called away, repeating the process.

The percentage of trades that are profitable, calculated as (number of winning trades / total trades) × 100.

The person or entity that sells an option and is obligated to fulfill the contract terms if the holder exercises the option.

A collar where the premium received from selling the call exactly offsets the premium paid for the put, creating downside protection at no net cost.

A third-order Greek measuring how gamma changes with changes in implied volatility.