Options

20 concepts in this category.

• Call Option

  A call option is like a coupon that lets you buy a stock at today's price even in the future. If the stock rises, you profit. If it falls, you only lose what you paid for the coupon (the premium).

• Put Option

  A put option is like insurance for your stocks. If you own shares and buy a put, you can sell them at the strike price even if the stock crashes. You pay a premium for this protection.

• Delta

  If a call has delta of 0.5, it gains $0.50 for every $1 the stock rises. Delta 1.0 means the option moves dollar-for-dollar with the stock. At-the-money options typically have delta near 0.5.

• Gamma

  Gamma measures how fast delta changes. High gamma means your option becomes more or less sensitive quickly as the stock moves. Near expiration, gamma is highest — small stock moves cause big swings in option value.

• Theta

  Options are like ice cubes that melt over time. Theta measures how fast value evaporates daily. An option with theta of -$0.05 loses $5 per day per contract, all else equal. Time is your enemy as an option buyer.

• Vega

  Vega measures how much an option's price changes when market expectations of volatility change. If you expect a big announcement (earnings, FDA), buy before the event — vega will boost your option's value as uncertainty rises.

• Rho

  Rho measures how much an option's price changes when interest rates change. It's the least important Greek for short-term options but matters for long-dated LEAPS. Rising rates benefit calls and hurt puts.

• Implied Volatility

  Implied volatility is the market's guess about how much a stock will move. High IV means expensive options (the market expects big moves). Low IV means cheap options. Buy options when IV is low, sell when IV is high.

• Moneyness

  Moneyness tells you how far the strike price is from the current stock price. At-the-money (ATM) means strike ≈ current price. In-the-money (ITM) means the option has intrinsic value. Out-of-the-money (OTM) means it doesn't yet.

• ITM / ATM / OTM

  ITM call: stock is already above the strike — has real value now. ATM: stock is right at the strike. OTM: stock hasn't reached the strike yet — you're betting it will. OTM options are cheaper but need a bigger move to profit.

• Strike Price

  The strike price is the agreed price in the option contract. For a call, you can buy the stock at the strike. For a put, you can sell at the strike. Choose your strike based on how big a move you expect.

• Expiration Date

  Options have a use-by date. After expiration, they're worthless unless exercised. Shorter expirations are cheaper but give you less time to be right. Longer expirations (LEAPS) cost more but give the trade more time to work.

• Covered Call

  You own 100 shares of Apple and sell someone the right to buy them at $200. They pay you $5 per share ($500). If Apple stays below $200, you keep the $500. If it rises above $200, you sell your shares at that price.

• Protective Put

  Like buying insurance on your car. You own 100 Apple shares and buy a put at $150. If Apple crashes to $100, your put lets you sell at $150. You paid a premium for this safety net.

• Bull Call Spread

  Instead of buying an expensive call, you buy one call and sell another at a higher price. The second sale reduces your cost. You profit if the stock rises, but only up to the higher strike. Cheaper than a naked call.

• Bear Put Spread

  Buy a put at a higher price and sell one at a lower price. The one you sell reduces your cost. You profit if the stock falls, but only down to the lower strike. Cheaper than a naked put.

• Iron Condor

  An iron condor sells both a call spread and a put spread. You collect premium and profit if the stock stays within a range. Think of it as betting the stock won't make a big move. Ideal when you expect a calm, boring market.

• Straddle

  You buy both a call and a put at the same strike. You profit if the stock makes a big move — up OR down. Perfect for earnings when you know something big will happen but don't know which way.

• Strangle

  Like a straddle but both options are out-of-the-money. Cheaper to enter but the stock needs to make an even bigger move to profit. More speculative than a straddle but costs less upfront.

• Collar

  A collar buys a put for protection and sells a call to pay for it. Your gains are capped at the call strike but losses are protected below the put strike. It's a low-cost hedge that sacrifices upside to prevent downside.