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Key terms used across VolRadar, defined for premium sellers. Each term links to the relevant methodology page or learn guide for a deeper explanation.
When an option seller is obligated to buy (put) or sell (call) shares at the strike price. Most likely for ITM options at expiration. American-style options can be assigned early.
⚡ KEY TAKEAWAY: Not a disaster — it's the plan in the wheel strategy. If you only sell puts on stocks you'd own, assignment is just the next step.
The return from a single trade scaled to a full year. Formula: (Premium / Capital) × (365 / DTE) × 100. A $2 premium on a $50 stock over 30 DTE = 48.7% annualized. Does not account for compounding or losses.
⚡ KEY TAKEAWAY: Looks impressive but is misleading if you ignore losses. Track actual account returns, not annualized returns on winners only.
An option whose strike price equals or is closest to the current stock price. ATM options have the highest time value, fastest theta decay, and roughly 0.50 delta.
⚡ KEY TAKEAWAY: Maximum theta but maximum gamma risk. Premium sellers rarely sell ATM — the sweet spot is 1-2 strikes OTM for better risk/reward.
When near-term VIX exceeds longer-term VIX (VIX/VIX3M ratio above 1.0). Signals market stress — unfavorable for selling premium.
⚡ KEY TAKEAWAY: Market is pricing more fear now than later. Reduce size, tighten stops, or sit out until contango returns.
A bearish credit spread that sells a lower call and buys a higher call, collecting premium if the stock stays below the short strike. The bearish counterpart to a put credit spread.
⚡ KEY TAKEAWAY: Use when you expect the stock to stay flat or decline. Collect premium upfront with defined risk — your max loss is the spread width minus the credit received.
The stock price at which a trade produces zero profit or loss at expiration. For a short put: strike minus premium received. For a covered call: stock cost minus premium received.
⚡ KEY TAKEAWAY: Always know your breakeven before entering. If the stock can realistically reach it, either widen the margin or skip the trade.
The difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask). Tighter spreads indicate better liquidity and lower execution costs.
⚡ KEY TAKEAWAY: Wide bid-ask = hidden cost on every trade. Stick to liquid underlyings where the spread is under 5% of the option price.
A basic volatility estimator using only daily closing prices. Simpler than Yang-Zhang but misses intraday extremes and overnight gaps. ORATS uses this as the basis for VRP calculations. This is the basis for the HV 20d metric displayed on VolRadar ticker pages.
⚡ KEY TAKEAWAY: Simple but blind to intraday spikes and overnight gaps. That's why VolRadar shows Yang-Zhang alongside it for the full picture.
When near-term VIX is lower than longer-term VIX (VIX/VIX3M ratio below 1.0). Normal market state — favorable for premium sellers.
⚡ KEY TAKEAWAY: Normal state = green light for sellers. VIX/VIX3M below 0.9 means term structure strongly supports premium selling.
An options strategy that sells a near-term option and buys a longer-term option at the same strike, profiting from accelerated time decay in the near-term leg. VolRadar recommends calendar spreads near earnings when the near-term IV is elevated relative to the back month.
⚡ KEY TAKEAWAY: Best deployed when near-term IV is pumped relative to the back month — sell the expensive leg and keep the cheap one. Earnings season is prime calendar spread territory.
Selling a put option while holding enough cash to buy 100 shares if assigned. The first phase of the wheel strategy. Profit comes from theta decay if the stock stays above the strike.
⚡ KEY TAKEAWAY: Only sell CSPs on stocks you're happy to own at the strike price. That mindset eliminates panic if assigned.
Selling a call option while owning 100 shares of the underlying stock. Generates income from premium but caps upside. The second phase of the wheel strategy after put assignment.
⚡ KEY TAKEAWAY: Sell calls above your cost basis to generate income while waiting to exit at a profit.
A trade that involves selling a closer-to-the-money option and buying a further out-of-the-money option, collecting net premium. Risk is capped at the spread width minus premium.
⚡ KEY TAKEAWAY: Defined risk = sleep better at night. Max loss is known upfront. Target 1/3 width of the spread as premium.
Selling a lower-strike call and buying a higher-strike call simultaneously. A bearish/neutral defined-risk strategy that collects premium upfront.
⚡ KEY TAKEAWAY: Use when you expect the stock to stay flat or drop. Pairs well with a put credit spread to form an iron condor.
The rate of change in an option's price for a $1 move in the underlying stock. A 0.30 delta put has roughly a 30% probability of expiring in-the-money. Premium sellers typically sell at 0.15–0.30 delta.
⚡ KEY TAKEAWAY: Sell at 0.15–0.30 delta for 70–85% probability of profit. Lower delta = safer but less premium.
The number of calendar days remaining until an option contract expires. Common DTE targets for premium sellers: 45 days for entry, 21 days for management.
⚡ KEY TAKEAWAY: Enter at 30–45 DTE for optimal theta/gamma balance. Close or roll at 21 DTE or 50% profit — whichever comes first.
The 1 standard deviation price range for a stock over a given timeframe, calculated from volatility. Approximately 68% of the time, the stock stays within this range.
⚡ KEY TAKEAWAY: Sell strikes outside the expected move to stay on the right side of probability ~68% of the time.
A multiplier showing how much a stock's implied move exceeds its typical daily range around earnings. An earnings effect of 4x means the expected earnings move is 4 times the normal daily range.
⚡ KEY TAKEAWAY: Earnings effect 4x+ means the market expects a move 4 times the normal daily range. That's where IV crush profits come from — if you're positioned correctly.
A VolRadar Weather Score component (15% weight) measuring what percentage of S&P 500 stocks have earnings within 7 days. Fewer upcoming earnings = safer to sell premium broadly.
⚡ KEY TAKEAWAY: Peak earnings season = minefield for premium sellers. When Earnings Safety is low, stick to stocks well past their report date.
VolRadar's automatic filter that flags or blocks premium selling recommendations near earnings. Caution flag within 14 days; hard block within 7 days. Earnings events are the single largest source of overnight gap risk for premium sellers.
⚡ KEY TAKEAWAY: Within 14 days = caution, reduce size. Within 7 days = hard block, no new premium positions. The gate protects you automatically.
VolRadar's 0–100 per-ticker composite combining VRP, IV Rank, Volatility Trend, Earnings Safety, and Term Structure. Measures how favorable a specific ticker is for premium selling. Not to be confused with the market-wide Weather Score.
⚡ KEY TAKEAWAY: Edge Score = per-ticker quality. Weather Score = market-wide conditions. Both should be high for the best setups.
Net gamma held by options market makers at each strike price. Positive GEX tends to suppress volatility; negative GEX can amplify moves.
⚡ KEY TAKEAWAY: Positive GEX = market makers dampen moves (good for sellers). Negative GEX = moves get amplified (risky).
The rate of change in delta for a $1 move in the underlying. Gamma is highest for at-the-money options near expiration. High gamma means delta changes rapidly, increasing risk for sellers.
⚡ KEY TAKEAWAY: High gamma near expiration = your delta shifts fast on any move. Close or roll by 21 DTE to stay ahead of gamma risk.
Historical Volatility measured over 20 trading days using ORATS close-to-close prices. This is the canonical realized volatility measure on VolRadar, used in VRP and RV Ratio calculations.
⚡ KEY TAKEAWAY: When you see "HV 20d" on VolRadar, it means the ORATS close-to-close 20-day realized volatility.
The market's forecast of how much a stock will move, derived from option prices. Higher IV means more expensive options.
⚡ KEY TAKEAWAY: Higher IV = more premium to collect when selling options. But also more risk if the stock moves.
Where current implied volatility stands relative to its 52-week range, expressed as 0–100. Formula: (Current IV − 52-week Low) / (52-week High − 52-week Low) × 100. IV Rank 75 means current IV is near the high end of its annual range.
⚡ KEY TAKEAWAY: IV Rank > 50 = premiums elevated, good for selling. Below 30 = cheap, consider waiting.
The percentage of days in the past year when IV was lower than today. Different from IV Rank: percentile is time-based, rank is range-based.
⚡ KEY TAKEAWAY: IV Percentile 80 = IV was lower than today 80% of the time. High percentile confirms elevated premiums.
The sharp drop in implied volatility after a known event (typically earnings). Options lose value rapidly even if the stock barely moves.
⚡ KEY TAKEAWAY: Never sell premium into earnings unless you specifically want the crush. VolRadar's earnings gate blocks this risk.
A defined-risk strategy that combines a put credit spread and a call credit spread. Profits when the stock stays between the two short strikes.
⚡ KEY TAKEAWAY: Best in low-to-moderate IV environments with range-bound stocks. Defined risk but lower premium than strangles.
A defined-risk strategy that sells an ATM straddle and buys protective wings. Similar to an iron condor but with short strikes at the same price. Higher premium but narrower profit zone.
⚡ KEY TAKEAWAY: Maximum premium but needs the stock to stay very close to the short strike. Use on pinned stocks or around max pain near expiration.
A call with a strike below the stock price, or a put with a strike above. ITM options have intrinsic value and higher delta, making them more likely to be assigned.
⚡ KEY TAKEAWAY: If your short option goes ITM, it's time to manage — roll, close, or accept assignment. Don't wait and hope.
A three-legged strategy combining a short put with a call credit spread. Designed to eliminate upside risk entirely while collecting premium from both sides. No risk if the stock rallies.
⚡ KEY TAKEAWAY: Perfect when you're bullish but still want premium from both sides. Zero upside risk if you collect enough credit to cover the call spread width.
The strike price where the most option contracts would expire worthless, causing maximum loss to option buyers. Stocks sometimes gravitate toward max pain near expiration due to dealer hedging flows.
⚡ KEY TAKEAWAY: Not a prediction, but a magnet. Stocks drift toward max pain more often than random — factor it in when choosing expiration timing.
The total number of outstanding option contracts at a given strike and expiration. High OI indicates liquidity and can reveal support/resistance levels through dealer hedging.
⚡ KEY TAKEAWAY: High OI at a strike = tighter spreads and better fills. Concentrated put OI can act as a floor — useful when picking short put strikes.
A call with a strike above the stock price, or a put with a strike below. OTM options have no intrinsic value — they consist entirely of time value, which premium sellers harvest through theta decay.
⚡ KEY TAKEAWAY: Where premium sellers live. OTM options are pure time value — every day that passes without a big move is money in your pocket.
Price levels with concentrated options open interest that can act as support (put walls) or resistance (call walls) due to dealer hedging flows.
⚡ KEY TAKEAWAY: Sell put strikes near or below put walls for extra support. Avoid selling calls near call walls.
Selling a higher-strike put and buying a lower-strike put simultaneously. Collects net premium with defined risk equal to the spread width minus premium received.
⚡ KEY TAKEAWAY: The bread-and-butter of defined-risk bullish trades. Pick your max loss upfront and let theta do the rest.
The statistical likelihood that a trade will be profitable at expiration. For a short put at 0.30 delta, POP is approximately 70%. Premium sellers target trades with POP above 65%.
⚡ KEY TAKEAWAY: Higher POP = smaller premium per trade but more winners over time. The math works in your favor at 65%+ POP with consistent sizing.
How much a stock actually moved over a past period, calculated from historical prices. Also labeled HV 20d on VolRadar. VolRadar displays Yang-Zhang RV on ticker pages (captures intraday + overnight movement) and uses ORATS close-to-close RV (HV 20d) for VRP calculations.
⚡ KEY TAKEAWAY: When RV is lower than IV, options are overpriced relative to actual movement — the core edge for sellers.
Realized volatility divided by implied volatility (RV/IV). Below 1.0 means the stock is moving less than options imply — favorable for selling premium. Below 0.85 is especially strong.
⚡ KEY TAKEAWAY: RV Ratio < 0.85 = strong edge for sellers. Think of it as a speedometer check: is the stock actually moving as much as options predict? Below 1.0 means no — and that gap is your edge.
Closing an existing options position and opening a new one with a different strike and/or expiration. Premium sellers roll to extend duration, collect additional premium, or manage a tested position.
⚡ KEY TAKEAWAY: Roll for a net credit or don't roll at all. Rolling for a debit just delays a loss. Best done before the position goes deep ITM.
The premium received divided by the capital at risk. For a $5 wide credit spread collecting $1.50, ROC = $1.50 / $3.50 = 42.9%. Compare ROC across setups to find the most efficient use of capital.
⚡ KEY TAKEAWAY: ROC tells you how hard your capital is working. Compare ROC across different setups on the same stock to find the most efficient trade.
VolRadar classifies daily market conditions into three regimes based on the Weather Score: Favorable (65–100, green), Selective (40–64, yellow), and Defensive (0–39, red). Each regime suggests a different position sizing approach.
⚡ KEY TAKEAWAY: Favorable = full size. Selective = half size, cherry-pick best setups. Defensive = sit out or minimum size only.
Selling both an OTM put and an OTM call on the same stock with the same expiration. Profits when the stock stays between the two strikes. Undefined risk on both sides.
⚡ KEY TAKEAWAY: Highest premium of all neutral strategies but undefined risk. Requires active management and larger accounts.
Buying (or selling) both an ATM call and ATM put at the same strike and expiration. A long straddle profits from large moves in either direction; a short straddle profits from range-bound movement.
⚡ KEY TAKEAWAY: Short straddles collect the most premium of any strategy but need the stock to stay glued to the strike. Best when IV is high and you expect a mean-reversion move post-event.
VolRadar's composite assessment of premium selling conditions for a ticker: Strong (all factors aligned), Medium (selective opportunity), or Weak (insufficient edge, avoid selling).
⚡ KEY TAKEAWAY: Strong signal = all five factors aligned, trade with confidence. Weak signal = something is off, skip it no matter how tempting the premium looks.
The relationship between implied volatility at different expirations. Contango (near-term IV lower than far-term) is normal. Backwardation (near-term higher) signals stress.
⚡ KEY TAKEAWAY: Contango = normal, good for sellers. Backwardation = market stress, reduce position size or wait.
The daily dollar amount an option loses from time decay, all else equal. A theta of -$0.05 means the option loses $5 per contract per day. Premium sellers profit from theta.
⚡ KEY TAKEAWAY: Your daily paycheck as a premium seller. The closer to expiration, the faster it accrues — but gamma rises too, so don't get greedy.
The daily erosion of an option's time value as expiration approaches. Premium sellers profit from theta decay — they want time to pass without large moves.
⚡ KEY TAKEAWAY: Theta accelerates after 21 DTE. Sell at 30–45 DTE, manage at 21 DTE to capture the steepest decay curve.
The CBOE Volatility Index measuring expected 30-day S&P 500 volatility derived from SPX option prices. Often called the "fear gauge." VIX 15–25 is the premium selling sweet spot; above 25 signals elevated uncertainty.
⚡ KEY TAKEAWAY: VIX 15–25 is the sweet spot for premium sellers — enough fear for rich premiums, not enough for gap risk.
The CBOE 3-Month Volatility Index. Comparing VIX to VIX3M reveals term structure: VIX/VIX3M below 1.0 (contango) is normal; above 1.0 (backwardation) signals near-term stress.
⚡ KEY TAKEAWAY: Watch VIX/VIX3M ratio, not VIX alone. Ratio below 1.0 confirms the market isn't panicking short-term — safer to sell.
The amount an option's price changes for a 1% move in implied volatility. High vega options are more sensitive to IV changes. Premium sellers benefit when IV decreases after entry.
⚡ KEY TAKEAWAY: Sell when vega is high (elevated IV) so you profit from both theta decay AND the eventual IV drop. Double tailwind.
A VolRadar Weather Score component (25% weight) that classifies the current VIX level into zones. Premiums are richest when VIX is 15–25: enough fear to inflate premiums, but not so much that gap risk overwhelms the edge. VolRadar uses VIX regime to scale position sizing recommendations and adjust signal confidence across all ticker pages.
⚡ KEY TAKEAWAY: VIX below 15 = premiums too cheap to bother. VIX above 30 = gap risk too high. The 15–25 zone is where sellers thrive. Always check VIX regime before sizing your positions.
A VolRadar Weather Score component (20% weight) measuring whether realized volatility is declining. Cooling vol means stocks are settling down, which benefits premium sellers.
⚡ KEY TAKEAWAY: Falling RV means stocks are calming down while options still price in yesterday's turbulence. That lag is your edge.
A cyclical income strategy: sell cash-secured puts until assigned, then sell covered calls on the shares until called away, then repeat. Works best on stocks you are willing to own.
⚡ KEY TAKEAWAY: The wheel works best on quality stocks with high IV Rank. Avoid wheeling meme stocks or companies you wouldn't hold.
VolRadar's daily 0–100 composite of 5 volatility signals (Premium Edge, VIX Regime, Volatility Trend, Earnings Safety, Term Structure) that summarizes whether conditions favor premium selling. The score is recalculated every trading day after market close using end-of-day options data from ORATS. It is benchmarked to the S&P 500 universe, giving you a single number to check before placing any trade.
⚡ KEY TAKEAWAY: 65–100 = Favorable (green light). 40–64 = Selective (pick spots). 0–39 = Defensive (sit out or cut size). Check the Weather Score every morning before you trade — it takes 5 seconds and can save you from selling into a hostile environment.
A volatility estimator that uses open, high, low, and close prices (not just closes). Captures both intraday range and overnight gaps for more accurate volatility measurement.
⚡ KEY TAKEAWAY: More accurate than close-to-close — VolRadar uses it on ticker pages so you see true stock movement, not just closing price changes.
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