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Every key concept across VolRadar — clearly defined and linked to the right tools and guides.
508 terms
Options contracts expiring the same day they are traded.
A 0DTE strategy uses options that expire the same trading day.
Form 1099-B is the broker-issued tax document reporting proceeds, cost basis, and gain or loss from options and securities transactions.
1DTE options expire the next trading day.
The 200% loss rule closes a short premium trade once its debit-to-close reaches twice the original credit received.
The 21 DTE rule is a tastytrade-derived guideline telling premium sellers to close or roll short option positions when 21 days remain to expiration, regardle...
2DTE options expire two trading days from entry.
A 50% profit target closes a short premium trade once half the original credit received has been captured as profit, locking in gains before remaining theta ...
The favorable capital gains split applied to Section 1256 contracts where 60% of gains are taxed at the long-term rate and 40% at the short-term rate, regard...
An adjusted option is a listed contract whose terms — strike, multiplier, or deliverable — were modified by the OCC following a corporate action such as a st...
An albatross spread is a very wide iron condor with short strikes placed far out-of-the-money, designed to profit when the underlying stays within an unusual...
An all-or-none (AON) order is a time-in-force modifier requiring the entire order quantity to execute as a single transaction with no partial fills.
An option contract that can be exercised by the holder at any time from purchase through expiration.
American-style options can be exercised on any trading day before and including expiration, while European-style options can only be exercised at expiration.
AM-settled options are cash-settled index contracts whose final value is determined by a special opening quotation on expiration Friday morning, not the prio...
Annualized return converts the profit from a single trade into a yearly rate, allowing comparison across trades with different holding periods.
An Asian option settles based on the average price of the underlying over a specified period rather than the final price at expiration.
Assignment is when the option buyer exercises their right and the seller must fulfill the obligation — delivering shares (short call) or buying shares (short...
An at-the-money option has a strike price equal to or very close to the current stock price.
The auto-exercise threshold is the minimum amount by which a long option must finish in the money at expiration to be exercised automatically.
The OCC rule that automatically exercises any option that is in-the-money by $0.01 or more at expiration, unless the holder submits a contrary instruction.
The Bachelier model is the earliest quantitative option pricing framework, published by Louis Bachelier in 1900.
Backwardation is when near-term implied volatility exceeds far-term IV, inverting the normal term structure.
A backwardation event is a specific occurrence where the VIX/VIX3M ratio rises above 1.0, meaning 30-day implied volatility prices above 93-day.
A bagholder is a trader stuck holding a position deep underwater, usually after refusing to sell on the way down.
The Barone-Adesi-Whaley model provides an analytical approximation for American option prices, published in 1987.
A barrier option activates or extinguishes when the underlying touches a predetermined price level.
A basket option pays off on a weighted combination of multiple underlyings treated as a single instrument.
A bear-call ladder sells one lower-strike call and buys two higher-strike calls, producing a credit position with limited downside risk and unlimited upside ...
A bear call spread is another name for a call credit spread — it sells a call at a lower strike and buys a call at a higher strike for a net credit.
A bear-put ladder sells one in-the-money put and buys two lower-strike puts, aiming to profit from a sharp drop while losing if the stock stays flat, rises, ...
A bear put spread buys a higher-strike put and sells a lower-strike put at the same expiration for a net debit.
A Bermuda option can be exercised only on specific predetermined dates before expiration.
Beta-weighted Greeks scale each position's Greeks by the underlying's beta to a benchmark, usually SPY.
Beta-weighting is a portfolio risk metric that scales each position's delta by its beta relative to a benchmark, usually SPY, producing a single beta-adjuste...
The bid-ask spread is the difference between the highest price a buyer will pay (bid) and the lowest price a seller will accept (ask) for an option.
A big lizard sells an at-the-money straddle and an out-of-the-money put, collecting a credit larger than the distance to the call breakeven, which removes al...
A binary option pays a fixed amount if the underlying finishes above or below the strike at expiration, zero otherwise.
Tree-based model that prices options by building a step-by-step lattice of possible future stock prices.
The Bjerksund-Stensland model is an analytical approximation for American option prices, introduced in 1993 and refined in 2002.
The Black 76 model, introduced by Fischer Black in 1976, prices European options on futures contracts.
Mathematical framework for calculating theoretical prices of European-style options using five inputs: stock price, strike price, time to expiration, risk-fr...
A block trade is a single large transaction, typically 10,000 shares or $200,000 notional, reported separately to the consolidated tape.
A box spread combines a bull call spread and a bear put spread at identical strikes and expirations, producing a synthetic zero-coupon loan used primarily fo...
A box spread on a broad-based index option (e.g., SPX) is a Section 1256 contract.
A bracket order is a three-leg structure combining an entry order with a profit-target limit and a protective stop-loss, all grouped as siblings.
The breakeven point is the stock price at which an options trade produces exactly zero profit or loss at expiration.
A broken-wing butterfly is a butterfly spread with uneven wing widths, skewing the risk profile bullish or bearish and often eliminating risk entirely on one...
A bull-call ladder buys one in-the-money call and sells two higher-strike calls, creating a cheap bullish position that turns bearish above the top short str...
A bull call spread buys a lower-strike call and sells a higher-strike call at the same expiration for a net debit.
A bull-put ladder buys one at-the-money put and sells two lower-strike puts, producing limited upside profit but exposing the trader to unlimited loss if the...
A bull put spread sells a higher-strike put and buys a lower-strike put at the same expiration for a net credit.
A butterfly spread buys one lower-strike option, sells two middle-strike options, and buys one upper-strike option, all at the same expiration.
The total capital available for new trades, including both cash and margin borrowing capacity.
Buying power reduction (BPR) is the amount of margin or cash a broker locks up as collateral when you open an options position.
Buy to Close (BTC) is the order action that exits an existing short option position by buying back the contract you previously sold.
Buy to Open (BTO) is the order action that creates a new long option position by purchasing a contract you did not previously hold.
BVIV is the Volmex Bitcoin Implied Volatility Index, a 30-day implied volatility benchmark for BTC built from a multi-venue option dataset.
A cabinet trade is a closing transaction executed at $0.01 or less, used to exit a near-worthless option position, avoid automatic exercise risk, and release...
A calendar spread sells a near-term option and buys a longer-term option at the same strike price.
A calendar straddle sells a front-month straddle and buys a back-month straddle at the same strike, profiting from time decay differentials and IV expansion ...
A calendar strangle sells a front-month strangle and buys a back-month strangle at wider OTM strikes, profiting from short-term theta decay while retaining l...
A call backspread sells one lower-strike call and buys two higher-strike calls, producing unlimited upside profit potential with limited loss in the middle z...
A call credit spread sells a lower-strike call and buys a higher-strike call on the same stock and expiration for a net credit.
A call option is a contract that grants the buyer the right, but not the obligation, to purchase 100 shares of the underlying at a specific strike price befo...
A call option gives the buyer the right (not the obligation) to buy 100 shares of the underlying at the strike price before expiration; a put option gives th...
A cancel-replace order is a single instruction that cancels an existing working order and submits a new one with modified parameters in one atomic message, u...
A brokerage account requiring full payment for all purchases using settled funds.
A cash-secured put (CSP) sells a put option while setting aside the full cash needed to buy 100 shares at the strike.
Cash settlement is an expiration method where in-the-money option value is paid in USD rather than delivered as shares.
The Constant Elasticity of Variance (CEV) model assumes variance scales with price raised to a power beta.
Charm measures how delta changes as time passes, also called delta decay or DdeltaDtime.
Charm exposure aggregates dealer sensitivity to delta decay from time passage across all outstanding options.
A chooser option lets the buyer decide at a specified date whether the contract becomes a call or a put.
A Christmas tree butterfly is a three-leg asymmetric option structure using a buy-skip-sell-skip-buy pattern across strikes, producing a skewed profit profil...
Circuit breakers are automatic trading halts triggered by large S&P 500 declines.
A cliquet option is a series of forward-starting at-the-money options where each period's strike resets based on the prior period's closing price.
A basic volatility estimator using only daily closing prices.
Closing an Option is the act of exiting an existing option position before expiration by entering an offsetting order — Sell to Close for longs, Buy to Close...
Closing for credit means exiting a position with a net cash inflow — receiving more premium on the closing leg than you pay.
Closing for debit means exiting a position with a net cash outflow — paying to close.
The closing print is the final official trade at the 4:00 PM Eastern closing auction, determining each security's official closing price.
A closing transaction is any trade that exits an existing options position, either by selling-to-close (STC) a previously bought option or by buying-to-close...
A collar combines a long stock position with a protective put and a covered call at the same expiration.
Color, also called gamma decay or DgammaDtime, is a second-order Greek measuring the rate of change of gamma with respect to time.
A compound option is an option on another option.
A concentration limit is a broker-imposed cap on how much exposure a single account can hold in one underlying, sector, or asset class relative to total equity.
A constructive sale is an IRS §1259 treatment that recognizes gain on an appreciated long position when the taxpayer enters an offsetting transaction such as...
Contango is the normal state of the VIX term structure where near-term implied volatility is lower than far-term.
The number of shares of the underlying stock that one option contract controls.
Conversion and reversal are put-call parity arbitrage trades.
Correlation delta is the partial derivative of a basket option price with respect to the correlation assumption between underlyings.
A corridor variance swap is a variance derivative with payoff capped to a predefined price corridor around spot.
Cost of carry is the net holding cost of a position, combining financing interest, borrow fees, and forgone dividends or yield, minus any income received.
A covered call sells a call option against 100 shares of stock you already own.
A covered call sells a short call against 100 shares the trader already owns, generating income with the obligation to sell the shares at the strike if assig...
A covered combo holds long stock, a short OTM call, and a short OTM put.
A covered put combines a short stock position with a short put option on the same underlying.
The Cox-Ross-Rubinstein model is the original binomial option pricing model, published in 1979.
The monthly release of Consumer Price Index data by the Bureau of Labor Statistics, measuring inflation across consumer goods and services.
A credit spread sells one option and simultaneously buys another option at a more distant strike, both on the same stock and expiration.
A credit spread is a vertical option spread that collects net premium upfront — the trader sells a higher-priced option and buys a lower-priced option of the...
A crossed market exists when the best bid on one venue is higher than the best offer on another, producing a negative quoted spread across the NBBO.
A cross trade occurs when a broker matches a client buy order with another client's sell order at a negotiated price, executing both internally.
Cumulative delta is the running sum of a position or portfolio's delta over time.
A dark pool is a private execution venue, registered as an alternative trading system (ATS), where orders are not displayed in public market data.
A day order is an instruction to buy or sell that remains active only during the current trading session and automatically expires unfilled at the closing bell.
The enhanced purchasing power available to pattern day traders, typically equal to four times the maintenance margin excess in the account.
Dealer gamma profile is the aggregate gamma exposure that options market makers carry across all strikes and expirations on an underlying.
Dealer positioning is the net gamma and delta inventory held by options market makers across all strikes and expirations.
A debit spread is any two-leg options spread where the trader pays a net premium at entry.
An option with a strike price significantly beyond the current underlying price, carrying high intrinsic value and minimal extrinsic value.
An option with a strike price far from the current underlying price, consisting almost entirely of extrinsic value with very low delta.
Defending a trade means making structural adjustments to a tested options position to improve its odds of profitability — rolling strikes, adding hedges, or ...
Delta measures how much an option's price changes for every $1 move in the underlying stock.
Delta hedging neutralizes directional exposure by holding shares (or futures) that offset an option position's delta.
A delta neutral position has a net delta of zero, meaning small moves in the underlying produce no first-order change in position value.
Depth of market is the visible aggregate size available at each price level in an order book, showing how much liquidity sits beyond the top bid and ask at p...
A diagonal roll closes an existing short option and opens a new one with both a different strike and a different expiration in a single order.
A diagonal spread combines different strike prices with different expiration dates in a single options position.
Diamond hands is r/wallstreetbets slang for refusing to sell a position despite volatility or pressure.
Dispersion trading is a strategy that goes long single-name volatility while short index volatility, profiting when correlation breaks down.
Dividend capture buys a stock shortly before its ex-dividend date and sells soon after to collect the dividend.
A Do Not Exercise (DNE) instruction tells the broker to override the OCC's automatic Exercise by Exception process for a long option that would otherwise aut...
A double calendar combines two calendar spreads at different strikes, typically one on the put side and one on the call side, widening the profit tent around...
A double diagonal uses two diagonal spreads at different strikes, combining directional bias and time decay exposure across both call and put sides of the un...
DTE is the number of calendar days remaining until an option expires.
Dual delta is the sensitivity of an option's value to a change in its strike price rather than the underlying.
DVOL is Deribit's Bitcoin Volatility Index, measuring 30-day expected BTC volatility from the Deribit BTC option chain.
The possibility that a short option position gets exercised by the holder before expiration day.
Schedule showing when publicly traded companies report quarterly earnings results.
The earnings effect is a multiplier showing how much larger a stock's expected earnings move is compared to its normal daily range.
VolRadar's Earnings Gate automatically flags or blocks premium selling on stocks near their earnings announcement.
The actual percentage price change in a stock following its quarterly earnings announcement.
A VolRadar Weather Score component (15% weight) measuring what percentage of S&P 500 stocks have earnings within 7 days.
Edge Score is VolRadar's per-ticker 0-100 composite that rates how favorable a specific stock is for premium selling right now.
Effective delta is delta adjusted for non-normal return distributions, skew, and conditional moves.
End-of-month (EOM) options expire on the last trading day of the calendar month, separate from the standard third-Friday monthly cycle.
Epsilon, also called psi, measures the sensitivity of an option's value to a change in the continuous dividend yield of the underlying.
An equity option is a contract on a single company's stock, giving the holder the right to buy or sell 100 shares at a set strike.
An erroneous trade is an execution that prints at a price clearly outside the contemporaneous market — usually from a fat-finger entry, broken algorithm, or ...
An ETF option is a contract on an exchange-traded fund such as SPY, QQQ, or IWM.
An option contract exercisable only at expiration, never before.
An exchange option pays off based on the difference between two underlyings, typically max(S1 - S2, 0) at expiration.
The first trading day on which a stock trades without entitlement to the next declared dividend.
Exercise by Exception is the OCC procedure that automatically exercises every long equity option finishing at least one cent in the money at expiration, unle...
An exercise limit is a regulatory ceiling on how many option contracts of the same class one account or aggregated group can exercise within five consecutive...
Exercising an option is the act of invoking the contract right — buying 100 shares per call at the strike price or selling 100 shares per put at the strike p...
Exercise is the option holder's choice to invoke their right to buy or sell at the strike price.
The options market's implied prediction for how much a stock will move after its earnings report.
The expected move is the dollar or percentage range that the options market predicts a stock will stay within over a given period, based on implied volatility.
The recurring monthly sequence a symbol's standard options follow.
The expiration date is when an option contract ceases to exist.
The component of an option's premium derived from time remaining and implied volatility, excluding any intrinsic value.
A fast market is an extreme volatility condition where exchanges relax market maker quote obligations, allowing bid-ask spreads to widen dramatically.
A fat-finger error is an order entry mistake — wrong price, wrong size, wrong side, or wrong symbol — that sends a trade order far outside the trader's intent.
Fat tails describe the tendency for financial returns to produce extreme events far more often than a normal distribution predicts.
The specific trading session when the Federal Reserve announces its interest rate decision, typically at 2:00 PM ET.
A fiduciary call combines a long call with a Treasury bill maturing to the strike amount at expiration.
FIFO (First-In-First-Out) is a tax-lot accounting method that sells the oldest acquired shares first when a partial position is closed, determining cost basi...
A fig leaf holds a deep in-the-money LEAPS call and sells a near-term call against it.
A fill-or-kill order demands that the entire quantity be filled immediately in a single transaction.
The finite-difference method is a numerical technique for solving the Black-Scholes PDE on a grid.
A flash crash is a sudden, severe market drop and partial rebound that completes within minutes, driven by liquidity disappearance and cascading automated or...
FLEX options are exchange-listed contracts with customizable terms — strike, expiration date, and exercise style — that trade on CBOE and other venues while ...
Federal Open Market Committee — the Federal Reserve body that sets US monetary policy, including the federal funds rate.
IRS form used to report gains and losses from Section 1256 contracts and straddles.
Form 8949, Sales and Other Dispositions of Capital Assets, lists every taxable sale of stocks, options, and other capital assets.
A forward-start option becomes active at a future date with its strike set then, typically at-the-money at activation.
Forward volatility is the implied volatility for a future time period, such as the 30-day volatility expected 30 days from now.
A Friday expiration is the standard last trading day for weekly and monthly options in U.S.
The property that options sharing the same underlying, strike, expiration, and type are fully interchangeable regardless of the exchange where they were traded.
A futures option is a contract whose underlying is a futures contract rather than a cash instrument.
Gamma measures how fast delta changes for every $1 move in the stock.
Gamma Exposure (GEX) measures the total gamma held by market makers across all strikes.
A gamma neutral position has a net gamma of zero, meaning the position's delta does not change as the underlying moves.
Gamma risk is the exposure of an option position to rapid changes in delta as the underlying moves.
Gamma scalping is an active trading strategy where a trader holds long options and repeatedly delta-hedges to capture profit when realized volatility exceeds...
A price amplification event where market makers hedging short gamma positions must buy shares as the underlying rises, or sell shares as it falls, creating a...
A gamma swap is a volatility derivative paying daily realized variance weighted by underlying price squared.
A gap option is a modified binary where the trigger strike and payoff strike differ.
GARCH (Generalized Autoregressive Conditional Heteroskedasticity) models forecast volatility by weighting recent returns and prior variance estimates.
Garman-Klass volatility is a volatility estimator using open, high, low, and close prices to extract more information than close-to-close returns.
Getting wheeled is the moment a cash-secured put gets assigned and the trader receives shares, then sells covered calls against them.
A good-till-canceled order remains active in the market across multiple trading sessions until it either fills or you manually cancel it, unlike day orders t...
Greek decomposition breaks a position's P&L into contributions from delta, gamma, theta, vega, and rho moves.
GVZ is the Cboe Gold ETF Volatility Index, measuring 30-day implied volatility from options on SPDR Gold Trust (GLD).
A haircut margin is the percentage reduction applied to a security's market value when pledged as collateral, reflecting its price volatility and liquidity r...
The hard-to-borrow rate is the annualized fee a short seller pays when borrowing scarce shares.
The Heston model, published by Steven Heston in 1993, is a stochastic volatility model where variance follows a mean-reverting square-root (CIR) process.
Higher-order Greeks are second and third derivatives of option price: charm, vanna, vomma, speed, color, and others.
HV 20d is 20-day historical volatility calculated from daily closing prices, sourced from ORATS.
An iceberg order is a large order broken into a small visible tip and a much larger hidden reserve.
An identified straddle is a tax-defined offsetting position pair the trader designates as such on the day it is established.
Immediate-or-cancel, or IOC, is a time-in-force instruction that fills whatever quantity is available on the book at submission and cancels any unfilled rema...
Implied correlation measures the average pairwise correlation between index components as implied by options pricing.
Process of reverse-engineering the volatility input from an option's observed market price using an iterative numerical method.
Implied volatility is the market's consensus forecast of how much a stock will move over a given period, extracted from option prices using a pricing model.
An index option is a contract on a market index such as SPX or NDX.
The deposit required to open a new leveraged position.
Institutional flow is aggregate buying and selling by pension funds, hedge funds, mutual funds, and sovereign wealth funds.
An in-the-money option has intrinsic value — the stock price has moved past the strike.
Intrinsic value is the real, exercisable value of an option — how far it's in the money.
IRA options trading is the practice of buying and selling options inside an individual retirement account.
An iron albatross spread is a four-leg iron condor variation with strikes placed unusually far from the money, collecting smaller premium in exchange for ver...
An iron butterfly sells an ATM straddle (same-strike put and call) and buys OTM wings for protection on both sides.
An iron condor sells a put credit spread and a call credit spread on the same stock with the same expiration, creating a range where you profit if the stock ...
An iron condor sells an out-of-the-money call vertical and an out-of-the-money put vertical at four different strikes, creating a wide profit zone that pays ...
IV crush is the rapid collapse in implied volatility after a known event removes uncertainty from option prices.
IV Percentile shows what percentage of trading days in the past year had implied volatility lower than today's level.
IV Rank measures where a stock's current implied volatility sits within its 52-week high-low range, scored 0 to 100.
A ladder option locks in gains at predetermined price rungs as the underlying moves favorably.
Lambda (option leverage ratio) expresses the percentage change in an option's price for a 1% change in the underlying.
The final session on which a specific option contract can be traded before it expires.
LEAPS (Long-term Equity AnticiPation Securities) are options contracts with expiration dates beyond one year.
A leg is a single option or stock position that forms one component of a larger multi-leg strategy.
Legging in or out is the practice of entering or exiting a multi-leg option strategy one leg at a time rather than as a single spread order, accepting execut...
The Leisen-Reimer model is an improved binomial tree with enhanced convergence for American option pricing, introduced in 1996.
Letting options expire means holding a position to its expiration date rather than closing it early.
Level 1 quotes are a basic market data feed showing only the top of book: best bid, best ask, last trade price, size, cumulative volume, and the daily high a...
Level 2 quotes are an enhanced market data feed showing multiple price levels of resting bids and offers beyond the NBBO, typically five to ten levels deep o...
The leverage effect is the empirical tendency of equity volatility to rise as prices fall, producing negative correlation between returns and volatility chan...
LIFO (Last-In-First-Out) is a tax-lot accounting method that sells the most recently acquired shares first when a partial position is closed, typically reduc...
A limit-on-close, or LOC, order is a limit order submitted for the closing auction that fills only if the official closing price meets or beats the specified...
A limit order instructs your broker to buy or sell an option at a specified price or better, giving you control over fill price but not guaranteeing executio...
Limit Up Limit Down (LULD) is an SEC-mandated mechanism that halts trading in an NMS security when its price moves outside dynamic upper and lower bands.
A liquidity provider is an order or participant that adds displayed liquidity to an order book via resting limit orders.
A liquidity taker is an order or participant that removes displayed liquidity by executing against existing resting orders.
Pricing model where volatility varies as a function of both the underlying asset's price level and time to expiration.
A locked market exists when the best bid on one venue equals the best offer on another, producing a zero-cent spread across the NBBO.
The lognormal distribution describes a random variable whose logarithm is normally distributed.
A long call is a bullish position created by buying a call option, giving the holder the right but not the obligation to purchase 100 shares of the underlyin...
A long call condor buys one lower-strike call, sells two middle-strike calls, and buys one upper-strike call, producing a defined-risk range-bound strategy w...
A long call is a debit position that pays premium for the right to buy stock at a strike, profiting on a strong rally above breakeven (strike + premium).
A Long Combo buys a call at a higher strike and sells a put at a lower strike, both same expiry, to create bullish synthetic stock-like exposure with a cheap...
A long guts combines a long in-the-money call and long in-the-money put at different strikes, similar to a long strangle but with ITM options for higher intr...
A long put is a bearish position created by buying a put option, giving the holder the right but not the obligation to sell 100 shares of the underlying at t...
A long put condor buys one higher-strike put, sells two middle-strike puts, and buys one lower-strike put, creating a defined-risk structure that profits whe...
A long straddle buys a call and a put at the same strike price and expiration, creating a position that profits when the underlying makes a large move in eit...
A long strangle buys an out-of-the-money call and an out-of-the-money put at different strikes with the same expiration.
Profits from selling assets held longer than one year, taxed at preferential rates of 0%, 15%, or 20% depending on income level.
A lookback option's payoff depends on the maximum or minimum price reached during the option's life.
The minimum account equity required to keep an existing leveraged position open.
Maker-taker is an exchange pricing model where liquidity providers who post resting orders receive rebates, while liquidity takers who execute against restin...
A brokerage account that lets you borrow funds from your broker to buy securities or sell options.
A broker demand requiring you to deposit additional funds or close positions when your account equity falls below the maintenance margin threshold.
Margin interest is the rate a broker charges on funds borrowed against your account to hold positions or buy securities.
The minimum equity your broker requires you to maintain when holding leveraged positions.
A firm or individual that continuously provides bid and ask quotes on options contracts, supplying liquidity to the market.
A market-on-close, or MOC, order is a market order that executes only in the closing auction, filling at the official closing print.
A market order executes immediately at the best available price, prioritizing speed over price.
Mark-to-market is the daily process brokers use to revalue every open position at the 4:00 PM ET closing price, producing unrealized P&L, updated margin requ...
The Section 475(f) mark-to-market election lets qualifying traders treat all open positions as sold at year-end fair market value.
A married put involves purchasing stock and a put option simultaneously as a single trade, guaranteeing downside protection from the moment the position opens.
Max pain is the strike price where the total value of all outstanding options (both calls and puts) would cause the maximum financial loss for option holders...
The Merton jump-diffusion model, introduced by Robert Merton in 1976, extends Black-Scholes by adding a Poisson jump process to geometric Brownian motion.
The midpoint price is the arithmetic average of the best bid and the best ask at a given moment; it is widely used as the reference price for hidden orders, ...
Minimum price variation (MPV) is the regulatory specification that defines the smallest allowable quoting increment for a security.
Mini options were reduced-size contracts representing 10 shares of the underlying rather than the standard 100.
A mixed straddle account is an IRS-approved basket established under Regulation 1.1092(b)-4T that pools designated mixed straddles, marks them to market dail...
A mixed straddle election under Section 1256(d) lets traders treat a straddle that combines Section 1256 contracts with non-1256 positions outside the 60/40 ...
A classification describing an option's strike price relative to the current underlying price.
Options pricing technique that generates thousands of random price paths for the underlying asset, calculates the payoff for each path, then averages the dis...
A monthly option is a standard listed contract that expires on the third Friday of each calendar month.
Monthly options expire on the third Friday of each month with high open interest and liquidity.
Mountain range options are multi-asset exotics named after mountain ranges: Everest, Altiplano, Atlas, Himalayan, and Annapurna.
The MOVE Index is the ICE BofA Merrill Lynch Option Volatility Estimate, measuring 1-month implied volatility of US Treasury options across 2, 5, 10, and 30-...
A naked call is the sale of a call option without owning the underlying shares.
A naked put is the sale of a put option without owning the underlying stock or a lower-strike put as a hedge.
Nanos, or nano options, were micro-sized contracts representing one share of the underlying instead of the standard 100.
The NBBO, or National Best Bid and Offer, is the highest displayed bid and lowest displayed ask for a security aggregated across all registered US equity exc...
NBBO for options is the National Best Bid and Offer — the highest bid and lowest ask across all U.S.
Monthly Non-Farm Payrolls report published by the Bureau of Labor Statistics on the first Friday of each month at 8:30 AM ET.
The total dollar value of the underlying asset controlled by an options position, calculated as the option's multiplier (typically 100) times the current sto...
An OCO, or one-cancels-other order, links two working orders so that execution or partial fill of one automatically cancels the other.
The opening print is the first official trade at the 9:30 AM Eastern opening auction, representing consolidated supply and demand accumulated during pre-market.
The opening rotation is the single-price call auction that primary listing exchanges run at 9:30 AM ET to establish opening prices.
An opening transaction is any trade that establishes a new options position, either by buying-to-open (BTO) a long call or put or by selling-to-open (STO) a ...
Open interest is the total number of outstanding option contracts that haven't been closed or exercised.
OPRA is the Options Price Reporting Authority, a securities information processor that consolidates quote and trade data from all US options exchanges.
The OPRA feed is the consolidated real-time data stream from the Options Price Reporting Authority, broadcasting every quote and trade across all U.S.
An option chain is a tabular display of all available call and put contracts for a specific underlying asset, organized by expiration date and strike price, ...
An option contract is a standardized financial agreement that grants the buyer the right, but not the obligation, to buy (call) or sell (put) 100 shares of t...
The factor that converts a per-share option premium quote into the total contract cost.
Option premium is the price paid by the buyer and received by the seller of an options contract.
Tiered broker authorization that determines which options strategies you're permitted to trade.
The OCC is the sole central counterparty clearinghouse for all US-listed options.
The final trading session for an options contract before it either expires worthless or gets exercised and assigned.
The total number of option contracts traded during a trading session for a specific underlying asset.
An order book is an exchange-maintained electronic list of all resting buy and sell limit orders for a security, organized by price level and time priority w...
Order imbalance is the net difference between buy and sell interest at the closing auction, published by NYSE and Nasdaq in the final 10 minutes.
An OTC option is a privately negotiated contract between two counterparties that does not trade on a regulated exchange.
An out-of-the-money option has a strike price that would produce no intrinsic value if exercised today.
OVX is the Cboe Crude Oil ETF Volatility Index, measuring 30-day implied volatility from options on United States Oil Fund (USO).
Paper hands is r/wallstreetbets slang for selling a position too early, especially during a drawdown.
An option whose market premium equals its intrinsic value with zero time value remaining.
Parkinson volatility is a volatility estimator using only daily high and low prices, assuming continuous geometric Brownian motion.
A path-dependent option's payoff depends on the price path taken by the underlying, not just the final price at expiration.
An SEC and FINRA rule classifying anyone who executes four or more day trades within five business days as a pattern day trader, requiring a minimum account ...
Payment for order flow (PFOF) is the practice where retail brokers route customer orders to wholesale market makers in exchange for per-share rebates, typica...
A visual chart plotting an options position's profit or loss at expiration across a range of underlying prices.
The Penny Pilot Program is an SEC initiative allowing 1-cent quote increments on liquid options instead of the normal 5-cent increments.
Physical settlement is an expiration method where 100 shares of the underlying are delivered per in-the-money contract at the strike price.
Pin action describes a stock's tendency to gravitate toward a strike with heavy open interest near expiration.
Pinned to a strike describes when a stock closes near a heavily traded option strike at expiration.
The tendency of a stock's price to gravitate toward a strike with high open interest as expiration approaches, driven by market maker gamma hedging dynamics ...
A covered call sells a short call against 100 owned shares, generating income and capping upside at the short strike.
PM-settled options are cash-settled index contracts whose final value is fixed at the 4:00 PM ET closing print on expiration day.
A poor man's covered call (PMCC) replaces the long stock in a traditional covered call with a deep in-the-money LEAPS call, then sells short-term OTM calls a...
Poor Man's Covered Put is a diagonal spread that buys a deep ITM long-dated put as a stock-short proxy and sells a short-dated OTM put against it for income.
Portfolio Greeks are the total delta, gamma, theta, vega, and rho across every position in an account.
A risk-based margin system that calculates requirements by stress-testing your entire portfolio across multiple scenarios.
Position Greeks are the aggregated delta, gamma, theta, vega, and rho of a single multi-leg options position.
The maximum number of option contracts a trader or entity can hold on the same side of the market in a single underlying security.
Position sizing is the discipline of deciding how much capital to risk on a single trade.
Post-earnings announcement drift is the empirical tendency of stocks to continue moving in the direction of their earnings surprise for 1 to 3 months after t...
A post-only order is a limit order that must add liquidity to the book.
Pre-earnings IV run-up is the steady climb in implied volatility on a stock's options during the 7 to 14 sessions before its earnings report.
Premium capture is the percentage of collected option premium that an option seller actually keeps after closing the trade.
Premium Edge is VolRadar's measure of how overpriced a stock's options are relative to its actual movement.
A premium printer is r/thetagang slang for a position or ticker that consistently generates option premium income.
Premium selling is the practice of writing (selling) options contracts to collect the time value embedded in their price.
Probability of Profit estimates the likelihood that an options trade will make at least $0.01 by expiration, based on the option's delta and current pricing.
A profit target order is a pre-set buy-to-close (or sell-to-close) order that exits a position once a defined profit level is reached.
A protective call pairs a short stock position with a long call.
A protective put is a hedging strategy where an investor buys a put option on stock they already own, creating a price floor that limits downside risk while ...
A put backspread buys two lower-strike puts and sells one higher-strike put, offering unlimited downside profit potential with limited middle-zone loss and s...
Fundamental pricing relationship stating that a call plus cash equals a put plus stock for the same strike and expiration.
The ratio of put option volume or open interest divided by call option volume or open interest.
Put/call walls are strike prices with unusually high concentrations of open interest, creating zones where market maker hedging activity influences stock pri...
A put credit spread sells a higher-strike put and buys a lower-strike put on the same stock and expiration for a net credit.
A put option is a contract that grants the buyer the right, but not the obligation, to sell 100 shares of the underlying at a specific strike price before or...
The quarterly simultaneous expiration of stock options, index options, index futures, and single-stock futures occurring on the third Friday of March, June, ...
A qualified covered call is an IRS-defined short call against long stock that preserves the underlying share's long-term holding period.
A quanto option's payoff is denominated in a different currency from the underlying's native currency, with the FX conversion fixed at a predetermined rate.
A quarterly option is a listed contract that expires on the last business day of a calendar quarter, typically March, June, September, and December.
Quote fading describes market makers canceling or repricing their displayed quotes faster than an incoming marketable order can arrive, so the size a trader ...
Quote stuffing is a high-frequency trading practice where a participant submits and immediately cancels enormous numbers of orders to slow rivals' systems an...
A rainbow option's payoff depends on the maximum or minimum of multiple underlyings.
A ratio spread uses an unequal number of bought versus sold options at different strikes, creating asymmetric risk and reward with potential for credit entry...
Realized correlation is the actual pairwise or basket correlation measured from historical returns, calculated after the fact.
Realized volatility measures how much a stock's price actually moved over a past period, calculated from historical returns.
Realized volatility (RV) measures how much an asset has actually moved over a past window, calculated as the annualized standard deviation of historical log ...
The date a shareholder must be recorded on a company's books to receive an upcoming dividend.
VolRadar classifies daily market conditions into three regimes based on the Weather Score: Favorable (65–100, green), Selective (40–64, yellow), and Defensiv...
The standard margin framework established by Federal Reserve Regulation T, requiring 50% initial margin for stock purchases.
Retail flow is buying and selling activity by individual investors, visible in payment-for-order-flow data routed through wholesalers like Citadel Securities...
Return on Capital measures how much premium you collect relative to the capital at risk in a trade.
Reversal Arbitrage is a market-maker strategy that combines short stock, long call, and short put at the same strike and expiry to lock in a riskless profit ...
A reverse iron butterfly buys an at-the-money straddle and sells an out-of-the-money strangle, profiting from a large move in either direction with defined l...
A reverse iron condor buys the inner strikes and sells the outer strikes, creating a debit position that profits when the underlying breaks out in either dir...
Rho measures how much an option's price changes for every 1-percentage-point move in interest rates.
A risk reversal combines selling an OTM put and buying an OTM call (bullish) or selling an OTM call and buying an OTM put (bearish).
Roll down and out closes a short option and opens a new one at a lower strike and later expiration.
Rolling down moves a short option position to a lower strike in the same expiration cycle, typically used on covered calls when the underlying drops or on ca...
Rolling for credit closes an existing short option and opens a new one such that the trader receives more premium than they pay to close.
Rolling for debit closes an existing short option and opens a new one at a cost — the trader pays more to close the old position than they receive opening th...
Rolling out closes a short option in its current expiration and reopens the same strike in a later expiration.
Rolling an option means closing your current position and simultaneously opening a new one at a different strike, expiration, or both.
Roll up and out closes a short option and opens a new one at both a higher strike and a later expiration.
The trading week when VIX futures and options positions are rolled from the expiring front-month contract to the next month.
Roth IRA options trading allows the same defined-risk strategies as a traditional IRA — covered calls, cash-secured puts, long options, and cash-secured spre...
Rough volatility is a class of stochastic volatility models where volatility follows a rougher-than-Brownian path with Hurst parameter below 0.5.
The Rule of 16 converts annualized implied volatility into a daily expected move by dividing IV by 16 (approximately the square root of 252 trading days).
RV Ratio divides realized volatility by implied volatility, giving you a single number that shows whether options are overpriced or underpriced.
RVX is the Cboe Russell 2000 Volatility Index, measuring 30-day expected volatility on the Russell 2000 small-cap index using out-of-the-money RUT options.
The SABR model (Stochastic Alpha Beta Rho) is a stochastic volatility model widely used for interest rate and FX option pricing.
Schedule D is the IRS form that summarizes capital gains and losses from Form 8949.
A seagull spread is a three-leg options combo that sells an OTM put, buys an ATM call, and sells an OTM call, producing a bullish structure with limited upsi...
SEC Rules 605 and 606 are execution-quality and order-routing disclosure rules.
Tax code provision that automatically treats gains and losses on qualifying contracts as 60% long-term and 40% short-term, regardless of actual holding period.
Securities lending is the market mechanism through which institutional shareholders lend stock to short sellers and arbitrageurs in exchange for fees and col...
Sell to Close (STC) is the order action that exits an existing long option position by selling the contract you previously bought.
Sell to Open (STO) is the order action that creates a new short option position by selling a contract you did not previously own.
The final price used to calculate profit, loss, and obligations for expiring options and futures contracts.
A short call is a bearish-to-neutral position created by selling a call option, collecting premium upfront in exchange for the obligation to deliver 100 shar...
A short call condor sells one lower-strike call, buys two middle-strike calls, and sells one upper-strike call, profiting when price exits the middle range i...
A Short Combo sells a call at a higher strike and buys a put at a lower strike, both same expiry, to create bearish stock-like exposure with a cheaper entry ...
A short guts sells an in-the-money call and in-the-money put at different strikes.
The total number of shares sold short expressed as a percentage of the stock's public float.
A short put is a bullish-to-neutral position created by selling a put option, collecting premium upfront in exchange for the obligation to buy 100 shares at ...
A short put condor sells one higher-strike put, buys two middle-strike puts, and sells one lower-strike put, profiting when the underlying breaks out of the ...
A short rebate is the interest income returned to a short seller on the cash collateral posted against borrowed shares.
A rapid price surge triggered when short sellers are forced to buy back shares to cover losses, creating a self-reinforcing feedback loop of rising prices an...
Selling both an ATM call and ATM put at the same strike and expiration.
A short strangle sells an out-of-the-money put and an out-of-the-money call on the same stock and expiration.
Profits from selling assets held one year or less, taxed at your ordinary income rate.
A shout option lets the holder lock in the current intrinsic value at any time before expiration while retaining upside.
Signal strength is a VolRadar composite metric from 0 to 100 that scores how strongly multiple volatility indicators align to favor premium selling on a give...
The Sizzle Index is a proprietary tastytrade metric ranking current option volume against its historical 5-day average.
A CBOE index measuring the perceived tail risk in S&P 500 options by comparing the implied volatility of out-of-the-money puts versus out-of-the-money calls.
Skewness measures asymmetry in the return distribution.
A skew trade is an options position expressing a view on the shape of the implied volatility skew curve, not on direction or level of volatility.
A skip-strike butterfly is a butterfly variant that skips one strike between the body and a wing, producing a wider profit zone and a directional tilt compar...
The difference between the expected fill price and the actual execution price of an options order.
Smart order routing, or SOR, is a broker-side algorithm that splits and routes an incoming order across exchanges, ECNs, and dark pools in real time to achie...
Speed measures how gamma changes as the underlying price moves — the third derivative of option price with respect to spot.
A spread option's payoff depends on the difference between two underlyings with a non-zero strike.
A single order that simultaneously executes two or more option legs as one combined trade.
SPX settlement is the cash-settlement process for S&P 500 index options using the Special Opening Quotation (SET).
Stochastic volatility models treat volatility as a random process with its own dynamics, rather than a fixed input.
The stock-loan rate is the interest rate charged on borrowed shares used to cover a short sale.
A stock repair strategy adds a 1x2 call ratio spread to a losing long stock position.
A stock replacement strategy substitutes long shares with a deep in-the-money LEAPS call.
Stock Substitute Strategy uses deep ITM long calls (often LEAPS) to replicate long-stock exposure at a fraction of the share price.
A stop-limit order combines a trigger price with a limit price.
A stop loss for options is a pre-defined exit rule that closes a position once losses hit a set threshold.
A stop order remains dormant until the underlying asset reaches a specified trigger price, at which point it converts into a market order and fills at the ne...
A straddle buys or sells a call and a put at the same strike price and expiration on the same stock.
The straddle rule under IRS §1092 requires loss deferral and holding-period reset when a taxpayer holds offsetting positions that substantially diminish risk...
A straddle combines a call and put at the same at-the-money strike, both with the same expiration.
A strap buys two calls and one put at the same strike and expiration.
Strike intervals are the standardized spacings between available strike prices on a listed option chain.
The strike price is the fixed price at which an option buyer can buy (call) or sell (put) the underlying stock.
A strip buys two puts and one call at the same strike and expiration.
Substantially identical is the IRS standard under Section 1091 that determines whether a replacement security triggers the wash sale rule.
ProShares Short VIX Short-Term Futures ETF providing inverse (-0.5x) exposure to VIX short-term futures.
A swaption is an option to enter an interest rate swap at a specified fixed rate on a future date.
A sweep order is an aggressive order type sent simultaneously to multiple exchanges to take all available liquidity at or through the NBBO before resting quo...
Synthetic Long Call combines long stock with a long put at the same strike and expiry to replicate the payoff of buying a call.
Synthetic Long Put combines short stock with a long call at the same strike and expiry to replicate the payoff of buying a put.
Synthetic Long Stock combines a long call and a short put at the same strike and expiry to replicate the payoff of owning 100 shares.
Synthetic positions replicate the payoff profile of stock or single-leg options using combinations of other instruments.
Synthetic Short Call combines short stock with a short put at the same strike and expiry to replicate the payoff of selling a call.
Synthetic Short Put combines long stock with a short call at the same strike and expiry to replicate the payoff of selling a put.
Synthetic Short Stock combines a short call and a long put at the same strike and expiry to replicate the payoff of shorting 100 shares.
Strategy of selling losing positions to realize capital losses that offset gains elsewhere in your portfolio.
Tendies is r/wallstreetbets slang for trading profits, especially the cash from a winning options trade.
Volatility term structure is the curve of implied volatility across different option expirations on the same stock.
Term structure inversion is when shorter-dated volatility indices price above longer-dated ones — typically VIX9D above VIX above VIX3M.
Test term..
Theoretical value is the model-derived fair price of an option, generated by a pricing framework like Black-Scholes using spot, strike, time, rate, dividend,...
Theta measures how much value an option loses each day from time decay alone, with all else held constant.
Theta burn is r/thetagang slang for the daily premium decay collected on short option positions.
Theta decay is the process by which options lose value over time as expiration approaches.
Theta gang refers to options traders who primarily sell premium to collect theta (time decay).
A theta negative position loses value each day from time decay, all else equal.
A theta positive position earns money each day from time decay if all other inputs stay constant.
Tick size is the smallest permissible price increment at which a security can be quoted or traded.
Time and sales is a chronological record of every executed trade in a security, showing price, size, timestamp to the millisecond, exchange of execution, and...
The portion of an option's premium exceeding its intrinsic value, driven by time remaining until expiration and implied volatility.
Trader Tax Status (TTS) is an IRS classification that lets active traders deduct business expenses on Schedule C.
A trade-through occurs when an order executes at a worse price than the prevailing best displayed quote on another venue.
A trailing stop automatically adjusts its trigger price as the market moves in your favor, locking in gains while maintaining downside protection.
The trinomial tree model generalizes the binomial tree by allowing three possible moves per step: up, down, and unchanged.
The quarterly simultaneous expiration of stock options, index options, and index futures on the third Friday of March, June, September, and December.
Tuesday and Thursday expirations are short-dated weekly options on SPX, QQQ, SPY, and a growing list of single names that expire on those weekdays.
Ultima is a third-order Greek measuring the rate of change of vomma with respect to volatility.
The underlying asset is the stock, ETF, or index from which an option contract derives its value.
Options trading volume that significantly exceeds normal levels for a given contract or underlying, often signaling informed institutional positioning before...
ProShares Ultra VIX Short-Term Futures ETF providing 1.5x leveraged daily exposure to the S&P 500 VIX Short-Term Futures Index.
A vanilla option is a standard call or put with no exotic features — a fixed strike, a fixed expiration, and American or European exercise style.
Vanna measures how delta changes when implied volatility moves — the cross-Greek linking delta and vega.
Vanna exposure measures aggregate dealer sensitivity of delta to implied volatility changes.
The Vanna-Volga method is a smile-fitting approach for FX options using three liquid market quotes: ATM, 25-delta risk reversal, and 25-delta butterfly.
Variance drain is the formal name for the gap between arithmetic and geometric returns caused by return variance.
A variance swap is an OTC derivative paying (realized variance minus strike variance) times notional at expiration.
Vega measures how much an option's price changes for every 1-percentage-point move in implied volatility.
A vega neutral position has a net vega of zero, meaning shifts in implied volatility do not change the position's value.
A vega positive position gains value when implied volatility rises and loses value when it falls.
Vega risk is the exposure an option position carries to changes in implied volatility.
Vera, sometimes called rhova, is a second-order Greek measuring the rate of change of rho with respect to volatility.
Veta measures how vega changes over time — the rate at which an option's volatility sensitivity decays as expiration approaches.
VIX1D is Cboe's 1-Day Volatility Index, calculated from 0DTE and 1DTE SPXW option prices to estimate expected S&P 500 volatility over the next trading day.
VIX3M is the CBOE 3-month (93-day) volatility index for the S&P 500.
VIX6M is the 6-month VIX, measuring 180-day implied volatility from SPX options.
VIX9D is the 9-day VIX, measuring 1-week implied volatility from SPX options.
Exchange-traded futures contracts based on the expected future value of the VIX index at expiration.
European-style, cash-settled option contracts on the VIX index.
VIX Regime categorizes the current VIX level into zones that shape premium selling behavior: Low (below 15), Normal (15-22), Elevated (22-30), and Crisis (ab...
VIX settlement is the final calculation determining VIX futures expiration value, using a special opening auction of SPX options on the expiration Wednesday ...
A VIX spike is a rapid surge in the CBOE Volatility Index, typically a same-day rise greater than 5 points or more than 20%, signaling sudden fear pricing in...
The VIX term structure is the curve formed by VIX9D, VIX, VIX3M, and VIX6M across different forward horizons.
The VIX is the CBOE Volatility Index measuring 30-day expected volatility of the S&P 500, derived from SPX option prices.
Volatility arbitrage is trading the spread between implied and realized volatility on one or more underlyings.
Volatility clustering is the empirical observation that large price moves tend to follow large moves and small moves follow small ones.
A volatility cone plots realized volatility percentiles across multiple lookback windows, showing where current vol sits relative to its historical range.
Volatility decay is the structural erosion long-vol ETFs like VXX and UVXY suffer from rolling VIX futures in contango.
Volatility drag is the compounding penalty that high realized volatility imposes on geometric returns — especially in leveraged products.
A volatility ETF is an exchange-traded fund providing exposure to VIX futures rather than VIX itself.
The volatility risk premium is the persistent gap between implied volatility and realized volatility.
Volatility skew describes how implied volatility differs across strike prices for the same expiration.
A volatility smile is a U-shaped pattern where both OTM puts and OTM calls have higher implied volatility than ATM options.
The volatility surface maps implied volatility across two dimensions: strike price and time to expiration.
Volatility trend describes the directional movement of realized volatility across recent trading sessions, classified as rising, flat, or declining based on ...
Vol of vol (volatility of volatility) measures how much implied volatility itself fluctuates.
VOLQ is Nasdaq's 30-day implied volatility index for NDX, the Nasdaq-100.
Vomma, also called volga, is a second-order Greek measuring the rate of change of vega with respect to volatility.
The CBOE VIX of VIX index measuring the expected volatility of VIX options over the next 30 days.
The VVIX/VIX ratio compares the volatility of VIX itself (VVIX) to the level of VIX.
VXD is the Cboe volatility index on the Dow Jones Industrial Average, measuring 30-day implied volatility from DJX options.
VXEEM is the Cboe Emerging Markets ETF Volatility Index, measuring 30-day expected volatility on the EEM ETF using its listed option chain.
VXN is the Cboe volatility index on the Nasdaq-100, measuring 30-day implied volatility from NDX options.
Barclays iPath Series B S&P 500 VIX Short-Term Futures ETN providing unleveraged exposure to front-month VIX futures.
IRS rule that disallows claiming a tax loss if you repurchase the same or substantially identical security within 30 days before or after the sale.
VolRadar's Weather Score is a daily 0-100 composite rating of market-wide premium selling conditions.
A weekly option is a listed contract that expires on a weekly cycle, typically Friday, with Monday, Tuesday, Wednesday, and Thursday expirations available on...
The wheel strategy cycles between selling cash-secured puts and covered calls on the same stock.
Writing an option is the act of selling a call or put contract that you do not already own, creating a new short position and collecting premium in exchange ...
Yang-Zhang volatility is a realized volatility estimator that uses open, high, low, and close prices to capture both overnight gaps and intraday range.
YOLO is r/wallstreetbets slang for an oversized, high-conviction trade where a trader bets a meaningful share of their account on a single position, often a ...
508 terms defined
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