Knowledge
Options trading glossary
Key options terms, clearly explained.
8 terms
Delta
Measure of an option's price sensitivity to changes in the underlying. A delta of 0.5 means the option rises 0.50 when the underlying rises 1.
Gamma
Rate of change of delta per 1 unit move in the underlying. High gamma = faster delta change.
Implied Volatility (IV)
Market-implied future volatility of the underlying, derived from option prices.
In the Money (ITM)
Option has intrinsic value: call with strike < spot or put with strike > spot.
Open Interest
Number of all open contracts in an option series. Indicator of liquidity.
Strike price
The price at which the underlying is bought or sold upon exercise.
Theta
Time decay per day. Long options have negative theta, short positive.
Vega
Sensitivity of option price to changes in implied volatility.