Knowledge Base
Options Trading Glossary
Clear, straight-talk definitions for the most important terms in derivatives trading.
Optioneer is an options trading tracker. Start with the tracking guide or see pricing.
- AssignmentMechanics
- The notice that an option seller receives requiring them to fulfill their obligation to buy (short put) or sell (short call) the underlying stock at the strike price.
- Covered CallStrategies
- Holding shares while selling calls against them to receive a premium. This caps upside and retains stock downside risk. The premium received is not the profit on the combined position.
- DeltaGreeks
- The measure of an option's price sensitivity to changes in the underlying asset's price. A delta of 0.50 means the option price will theoretically move $0.50 for every $1.00 move in the stock. Why it matters: Delta tells you how directional your position really is and helps size hedges.
- GammaGreeks
- The rate of change of an option's Delta. Gamma is highest for at-the-money options near expiration and represents the acceleration of directional risk. Why it matters: High Gamma positions can shift quickly, requiring closer monitoring.
- Implied Volatility (IV)Mechanics
- A metric that captures the market's view of the likelihood of changes in a given security's price. Higher IV results in more expensive option premiums. Why it matters: IV tells you whether options are relatively cheap or expensive compared to typical conditions.
- Iron CondorStrategies
- A neutral, multi-leg strategy defined by two vertical spreads (one put, one call) that profits when the underlying asset stays within a specific range.
- IV CrushMechanics
- A rapid decrease in Implied Volatility, often after an event such as earnings. Lower IV generally reduces option values with other factors held constant; stock-price changes and other exposures can outweigh that effect.
- Probability of Profit (POP)Mechanics
- An estimate of the likelihood that a trade will end profitably at expiration, based on current market conditions and option pricing. It is a planning and comparison tool, not a guarantee — actual outcomes depend on how the underlying moves.
- The Wheel StrategyStrategies
- A sequence of selling cash-secured puts and, if assigned shares, selling covered calls against them. Premiums are cash received, not assured profit; losses on the stock can exceed those premiums.
- ThetaGreeks
- An estimate of an option's price sensitivity to one day passing, with other factors held constant. Theta changes with market conditions and time to expiration. Positive position Theta is not daily cash income or guaranteed profit.
- VegaGreeks
- The measure of an option's sensitivity to changes in Implied Volatility (IV). High Vega options are more sensitive to volatility shifts. Why it matters: Vega helps you understand how earnings, news, or market uncertainty will affect your position.
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Short, practical guides that build on the terms above.