Options Flashcards

All 26 terms in this deck

The full list, for reference and search.

0DTE (Zero Days to Expiration)

A 0DTE option expires the same day it trades.

Assignment

Assignment is when an option seller is required to fulfill the contract: deliver 100 shares at the strike on a short call, or buy 100 shares at the strike on a short put.

At the Money (ATM)

At the money means the option's strike sits at or nearest to the current stock price.

Call Option

A call option gives the buyer the right, but not the obligation, to buy 100 shares of the underlying stock at a fixed strike price any time before expiration.

Cash-Secured Put

Selling a cash-secured put means writing a put while holding enough cash to buy 100 shares at the strike if assigned.

Covered Call

A covered call is 100 shares of stock plus a call sold against them.

Delta

Delta measures how much an option's price changes for a $1 move in the underlying stock.

Expiration Date

The expiration date is the last day an option contract exists; after it, the option is either exercised or gone.

Extrinsic Value

Extrinsic value is everything in an option's price that is not intrinsic value — the premium paid for time remaining and for implied volatility.

Gamma

Gamma is the rate at which delta changes per $1 move in the stock — the acceleration behind delta's speed.

Implied Move

The implied move is the size of the swing the options market expects from an upcoming event, estimated as the at-the-money straddle price divided by the stock price, using the first expiration after the event.

Implied Volatility (IV)

Implied volatility is the amount of future movement the options market is pricing into a stock, expressed as an annualized percentage and backed out from option prices themselves.

In the Money (ITM)

An option is in the money when it has intrinsic value: a call with the stock above its strike, a put with the stock below it.

Intrinsic Value

Intrinsic value is what an option would be worth if exercised this instant: max(0, stock price - strike) for a call, max(0, strike - stock price) for a put.

Iron Condor

An iron condor sells an out-of-the-money put spread and an out-of-the-money call spread on the same expiration, collecting two credits for a bet that the stock stays inside a range.

IV Crush

IV crush is the sharp drop in implied volatility the moment a known event passes, deflating option prices even when the stock moves in the buyer's favor.

Open Interest

Open interest counts the option contracts that currently exist and remain open at a given strike and expiration — positions created but not yet closed, exercised, or expired.

Option Premium

The premium is the price of an option — what the buyer pays and the seller collects, quoted per share.

Out of the Money (OTM)

An out-of-the-money option has zero intrinsic value: a call with its strike above the stock price, or a put with its strike below it.

Put Option

A put option is the right to sell 100 shares of the underlying at the strike price before expiration.

Straddle

A straddle is a long call and a long put at the same strike and expiration, almost always at the money.

Strangle

A strangle pairs an out-of-the-money call with an out-of-the-money put on the same expiration — same wager as a straddle, movement over direction, but built with cheaper strikes set apart from the stock price.

Strike Price

The strike price is the fixed price at which an option contract converts into stock: the price a call holder pays to buy shares, or a put holder receives to sell them.

Theta

Theta is the dollar amount an option loses to time decay each day, all else equal.

Vega

Vega measures how much an option's price changes when implied volatility moves one percentage point.

Vertical Spread

A vertical spread buys one option and sells another of the same type and expiration at a different strike, capping both the cost and the payoff.