Reference
Glossary
- Delta
- How much an option's price is expected to move for a $1 move in the underlying.
- Gamma
- How much delta itself is expected to change for a $1 move in the underlying.
- Vega
- How much an option's price is expected to move for a 1 percentage point change in implied volatility.
- Theta
- How much value an option is expected to lose per day, all else equal, purely from time passing.
- Rho
- How much an option's price is expected to move for a 1 percentage point change in interest rates.
- Capped / Uncapped
- Whether a strategy's maximum loss (risk) or maximum gain (reward) is a known, bounded number, or can grow without a fixed limit.
- Breakeven
- The underlying price at expiration where a strategy's profit is exactly zero -- above or below it, the position moves into profit or loss.
- Moneyness
- Where a strike sits relative to the current underlying price: in the money (has intrinsic value), at the money (strike close to the current price), or out of the money (no intrinsic value).
- Premium
- The price paid (if long) or received (if short) for an option, per contract.
- Strike
- The fixed price at which an option's holder may buy (call) or sell (put) the underlying.
- Expiry
- The date after which an option no longer exists and settles based on the underlying's price at that time.
- Implied Volatility (IV)
- The market's expectation of the underlying's future volatility, implied by an option's current price.
- Leg
- One individual option (or underlying position) within a multi-part strategy.
- Net Debit / Net Credit
- Whether a strategy costs money to enter (debit) or pays money up front (credit), summed across all its legs.
- Slippage
- The extra cost of filling an order immediately by crossing the bid-ask spread, instead of at the theoretical mid-price.
- Fee
- The exchange's commission for executing a contract, usually a small percentage of the underlying's price or the option's premium.