Complete Options Trading Terminology Guide

Version: 15 September 2026
Suitable for: Beginners learning U.S. stock options and using IBKR / TradingView / option chains
Language: English
Note: This material is for educational purposes only and does not constitute personal investment advice.

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Table of Contents

1. Basic Option Concepts
2. Calls and Puts
3. Option Buyers and Sellers
4. Strike Price
5. Expiration Date
6. Premium
7. Contract and Contract Multiplier
8. Intrinsic Value
9. Extrinsic Value / Time Value
10. ITM / ATM / OTM
11. Break-even
12. Option Chain
13. Bid / Ask / Spread
14. Volume
15. Open Interest
16. Liquidity
17. Implied Volatility (IV)
18. Historical Volatility (HV)
19. IV Rank and IV Percentile
20. The Greeks Overview
21. Delta
22. Gamma
23. Theta
24. Vega
25. Rho
26. Alpha
27. Beta
28. Leverage
29. Moneyness
30. Exercise
31. Assignment
32. American vs European Options
33. Cash-settled vs Physical-settled
34. Long / Short
35. Buy to Open / Sell to Close
36. Sell to Open / Buy to Close
37. Market / Limit / Stop Order
38. Slippage
39. Early Assignment
40. Ex-dividend Date and Options
41. Time Decay
42. Volatility Crush
43. Expected Move
44. Probability of Profit / Probability ITM
45. Max Profit / Max Loss
46. Covered Call
47. Cash-Secured Put
48. Protective Put
49. Vertical Spread
50. Bull Call / Bear Put Spread
51. Credit Spread / Debit Spread
52. Straddle / Strangle
53. Iron Condor
54. Calendar Spread
55. LEAPS
56. 0DTE / DTE
57. Pin Risk
58. Margin
59. Buying Power
60. Naked Option
61. Practical Option Greeks Example
62. What to Check Before Buying an Option
63. Common Misunderstandings
64. Quick Terminology Reference

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1. Basic Option Concepts

An option is a financial contract with an expiration date.

The buyer pays a premium to obtain a right to buy or sell an underlying asset at a specified price, either before or at a specified date depending on the contract.

There are two main types:

• Call Option: the right to buy an asset
• Put Option: the right to sell an asset

Important:

Buying an option means buying a contractual right. It does not mean directly buying the stock.

Example:

• ORCL current price: $150
• Buy one $160 strike Call expiring in 30 days
• Premium: $3.00

You have not bought ORCL shares. You have bought a contract that gives you the right, subject to the contract terms, to buy ORCL at $160.

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2. Calls and Puts

Call Option

A Call can be understood as:

I think the stock price may rise.

A Call buyer generally wants the stock price to rise above the strike price by enough to cover the premium paid.

Example:

• Stock price: $100
• Call strike: $105
• Premium: $2

If the stock is $115 at expiration:

Intrinsic value:

$115 - $105 = $10

Subtract the premium:

$10 - $2 = $8

The theoretical profit is $8 per share.

A standard U.S. equity option contract generally represents 100 shares:

$8 × 100 = $800

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Put Option

A Put can be understood as:

I think the stock price may fall.

Example:

• Stock price: $100
• Put strike: $95
• Premium: $2

If the stock falls to $85 at expiration:

Intrinsic Value = $95 - $85 = $10
Profit = $10 - $2 = $8/share

For one contract:

$8 × 100 = $800

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3. Option Buyers and Sellers

Every option trade has two sides.

Option Buyer

The buyer:

• Pays the premium
• Receives a contractual right
• Usually has maximum loss limited to the premium paid
• Faces time decay

Option Seller / Writer

The seller:

• Receives the premium
• Takes on an obligation
• May be assigned
• Can face very large risk with some strategies

In particular:

A naked Call can theoretically have unlimited loss.

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4. Strike Price

The strike price is the price specified in the option contract.

Example:

ORCL:

Current Price = $150
Call Strike = $160

The holder has the right, subject to the contract terms, to buy the shares at $160.

In general, strikes closer to the current stock price tend to have higher premiums than otherwise comparable options that are further away.

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5. Expiration Date

Every option has an expiration date.

Example:

Expiration: 2026-10-16

After expiration, the contract ceases to exist.

One of the most important risks for an option buyer is:

You can be correct about the direction of the stock and still lose money if the move happens too late.

Options have a limited life.

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6. Premium

The premium is the price paid to buy an option.

For example, if an option chain shows:

Call = $4.20

A standard U.S. equity option normally represents 100 shares:

$4.20 × 100 = $420

So the approximate amount paid is $420 plus commissions and fees.

Therefore, when an option quote shows $4.20, it does not usually mean the whole contract costs only $4.20.

The premium is influenced by factors such as:

• Stock price
• Strike price
• Time to expiration
• Implied volatility
• Interest rates
• Dividends
• Market supply and demand

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7. Contract and Contract Multiplier

A standard U.S. equity option usually represents:

1 Contract = 100 Shares

Therefore, if the premium is:

Premium = $2.50

The approximate contract cost is:

$2.50 × 100 = $250

However:

Some adjusted options affected by corporate actions may have a multiplier or deliverable that is different from 100 shares.

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8. Intrinsic Value

Intrinsic value means:

How much value would the option have if it were exercised immediately?

Call

Intrinsic Value = Max(Stock Price - Strike, 0)

Example:

Stock = $120
Strike = $100
Intrinsic = $20

Put

Intrinsic Value = Max(Strike - Stock Price, 0)

Example:

Stock = $80
Strike = $100
Intrinsic = $20

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9. Extrinsic Value / Time Value

An option premium can generally be thought of as:

Premium = Intrinsic Value + Extrinsic Value

Extrinsic value reflects factors such as:

• Remaining time
• Implied volatility
• Market expectations
• Interest rates
• Dividend effects

Example:

Stock = $110
Call Strike = $100
Option Premium = $14

Intrinsic value:

$110 - $100 = $10

Extrinsic value:

$14 - $10 = $4

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10. ITM / ATM / OTM

ITM — In The Money

An ITM option has intrinsic value.

For a Call:

Stock > Strike

For a Put:

Stock < Strike

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ATM — At The Money

The strike price is approximately equal to the stock price.

Example:

Stock = $100
Strike = $100

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OTM — Out of The Money

An OTM option has no intrinsic value.

For a Call:

Stock < Strike

For a Put:

Stock > Strike

An OTM option’s value consists mainly of extrinsic value.

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11. Break-even

Long Call

Break-even = Strike + Premium

Example:

Strike = $100
Premium = $5
Break-even = $105

Long Put

Break-even = Strike - Premium

Example:

Strike = $100
Premium = $5
Break-even = $95

Important:

This usually refers to the break-even price at expiration.

Before expiration, the option may still have extrinsic value, so the position can behave differently.

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12. Option Chain

An option chain is a list of available:

• Expiration dates
• Strike prices
• Calls
• Puts

Common columns include:

Bid
Ask
Last
Volume
Open Interest
IV
Delta
Gamma
Theta
Vega

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13. Bid / Ask / Spread

Bid

The highest price a buyer in the market is currently willing to pay.

Ask

The lowest price a seller in the market is currently willing to accept.

Example:

Bid = $3.00
Ask = $3.40

The spread is:

$3.40 - $3.00 = $0.40

A wider spread generally indicates poorer liquidity or higher transaction friction.

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14. Volume

Volume is the number of contracts traded during the current trading session.

Example:

Volume = 5,000

This means approximately 5,000 contracts of that option have traded that day.

Higher volume often helps liquidity, but volume alone is not enough to judge whether an option is easy to trade.

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15. Open Interest

Open Interest (OI) is the number of outstanding option contracts that remain open.

Example:

OI = 25,000

This means approximately 25,000 contracts remain open.

Higher open interest often indicates greater market participation.

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16. Liquidity

Liquidity describes:

How easily you can buy or sell an option without giving up too much on price.

Better liquidity often includes:

• Narrow Bid/Ask spread
• High volume
• High open interest
• Multiple market makers
• An actively traded underlying asset

Example:

Bid 4.95 / Ask 5.05

is generally healthier than:

Bid 3.50 / Ask 6.50

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17. Implied Volatility (IV)

IV = Implied Volatility

IV reflects the market’s expectation of future volatility.

Important:

IV does not predict whether the stock will go up or down.

High IV mainly means:

The market expects larger price movement.

High IV

Usually:

• Option premiums tend to be more expensive

Low IV

Usually:

• Option premiums tend to be cheaper

For example, IV often rises before an earnings announcement.

After earnings are released, IV can fall sharply. Even if you correctly predict the direction of the stock move, a large decline in IV can still reduce the option’s value.

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18. Historical Volatility (HV)

HV = Historical Volatility

HV measures how much the stock actually moved in the past.

A simple distinction:

HV = Past realized movement
IV = Market-implied future movement

IV and HV can be compared, but one does not have to converge to the other.

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19. IV Rank and IV Percentile

IV Rank

IV Rank compares current IV with the highest and lowest IV over a historical period.

A simplified formula is:

IV Rank =
(Current IV - 52-week Low IV)
/
(52-week High IV - 52-week Low IV)

Example:

52-week low = 20%
52-week high = 60%
Current = 50%

IV Rank:

(50 - 20) / (60 - 20)
= 75%

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IV Percentile

IV Percentile shows the percentage of days in a historical period when IV was lower than the current IV.

Example:

IV Percentile = 80%

A simple interpretation is:

Over the measured period, IV was lower than the current level on approximately 80% of days.

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20. The Greeks Overview

The Greeks describe:

How sensitive an option’s price is to different variables.

The five major Greeks are:

Greek	Mainly Measures
Delta	Change in the underlying price
Gamma	Rate of change of Delta
Theta	Passage of time
Vega	Change in implied volatility
Rho	Change in interest rates

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21. Delta

Delta can be understood as:

Approximately how much an option price may change when the stock price moves by $1, assuming other factors remain unchanged.

Example:

Call Delta = 0.60

If the stock rises:

+$1

the option may theoretically rise by approximately:

+$0.60

assuming other factors remain unchanged.

Call Delta

Usually ranges from approximately:

0 to +1

Put Delta

Usually ranges from approximately:

0 to -1

Example:

Put Delta = -0.40

If the stock rises by $1, the Put may theoretically fall by about $0.40.

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Another Common Use of Delta

Traders sometimes use Delta as a rough proxy for the probability that an option will finish ITM.

Example:

Delta = 0.30

Some traders may loosely interpret this as roughly a 30% probability of finishing ITM.

However:

This is not a precise probability and should not be treated as a guarantee.

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22. Gamma

Gamma describes:

How much Delta changes when the underlying stock moves by $1.

Example:

Delta = 0.50
Gamma = 0.05

If the stock rises by $1:

New Delta ≈ 0.55

If the stock rises another $1, Delta may increase again.

Gamma is generally:

• Highest around ATM
• More sensitive as expiration approaches

Therefore, near-expiration ATM options can move extremely quickly.

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23. Theta

Theta describes:

The theoretical loss in option value caused by one day passing, assuming other factors remain unchanged.

Example:

Theta = -0.08

This means, approximately:

-$0.08/share per day

For one standard contract:

$0.08 × 100 = $8/day

Theta is generally negative for an option buyer.

Especially near expiration:

Time decay often accelerates.

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24. Vega

Vega describes:

Approximately how much an option price changes when IV changes by 1 percentage point.

Example:

Vega = 0.12

If IV changes from:

30% → 31%

the option may theoretically gain approximately:

$0.12

If IV falls from:

30% → 25%

that is a 5 percentage-point drop:

0.12 × 5 = $0.60

The option may theoretically lose approximately $0.60 because of the decline in IV, assuming other factors remain unchanged.

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25. Rho

Rho measures:

The effect of a change in interest rates on an option’s theoretical value.

For short-dated options, Rho is often relatively small.

For long-dated options such as LEAPS, Rho may be more significant.

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26. Alpha

Alpha is not a standard Option Greek.

This is a common point of confusion.

Alpha is generally a portfolio or investment-performance term:

It represents return above or below what would be expected relative to a benchmark and a risk model.

Example:

A strategy produces:

Return = 15%

The return expected from the risk model is:

10%

A simplified interpretation is:

Alpha ≈ +5%

This suggests the strategy generated about 5 percentage points of excess return.

In options, the Greeks you will most commonly encounter are:

Delta
Gamma
Theta
Vega
Rho

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27. Beta

Beta measures a stock’s sensitivity relative to the broader market.

Example:

Beta = 1.0

The stock has historically moved roughly in line with the market.

Beta = 1.5

The stock has historically tended to move more than the market.

Beta is not an Option Greek, but it can help you understand the risk characteristics of the underlying asset.

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28. Leverage

Options can provide exposure to a larger notional amount of stock with less upfront capital.

Example:

Buying 100 shares at $100 would require:

100 shares × $100 = $10,000

A Call with:

Premium = $5

would cost approximately:

$5 × 100 = $500

That $500 option position is linked to the price movement of 100 shares.

However:

Leverage can magnify both gains and losses.

A long option buyer can lose 100% of the premium paid.

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29. Moneyness

Moneyness describes the relationship between the strike price and the current stock price:

ITM
ATM
OTM

Deep ITM:

The strike is far into the money.

Deep OTM:

The strike is far away from the current stock price and has no intrinsic value.

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30. Exercise

Exercise means:

The option holder uses the contractual right.

Example:

You hold a Call with:

Strike = $100

If you exercise the Call, you can buy the stock at $100 according to the contract terms.

However, many option traders do not exercise.

Instead, they may:

Sell to Close

and close the option position directly.

Reasons can include:

• Preserving remaining extrinsic value
• Avoiding ownership of 100 shares
• Reducing capital requirements

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31. Assignment

Assignment mainly affects option sellers.

Example:

You:

Sell to Open 1 Call

If a holder exercises the option, you may be assigned.

This means:

You must fulfil the contractual obligation.

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32. American vs European Options

American-style

Can generally be exercised on any eligible trading day before expiration.

Many U.S. equity options are American-style.

European-style

Can generally only be exercised at expiration according to the contract rules.

Some index options are European-style.

Important:

American-style and European-style refer to exercise rules, not whether the option trades in the United States or Europe.

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33. Cash-settled vs Physical-settled

Physical Settlement

Exercise results in delivery or receipt of the underlying shares.

Example:

Many U.S. equity options.

Cash Settlement

No shares are delivered.

The contract is settled in cash based on the settlement value.

Some index options use cash settlement.

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34. Long / Short

Long Option

You are the buyer.

Examples:

Long Call
Long Put

Short Option

You are the seller.

Examples:

Short Call
Short Put

Being short an option does not necessarily mean you are bearish.

For example, a Short Put is often a bullish or neutral position.

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35. Buy to Open / Sell to Close

If you do not already have a position:

Buy to Open

means opening a Long Option position.

Later, to close it:

Sell to Close

Example:

Buy Call @ $3
Sell Call @ $5

Profit:

($5 - $3) × 100
= $200

before commissions and fees.

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36. Sell to Open / Buy to Close

To open a Short Option position:

Sell to Open

To close it later:

Buy to Close

Example:

Sell Put @ $4
Buy Back @ $1

Profit:

($4 - $1) × 100
= $300

before commissions and fees.

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37. Market / Limit / Stop Order

Market Order

An order intended to execute as quickly as possible at available market prices.

Because option spreads can sometimes be wide, Market Orders can involve substantial price risk.

Limit Order

An order that specifies the maximum price you are willing to pay when buying or the minimum price you are willing to accept when selling.

Example:

Bid = $3.00
Ask = $3.40

You could enter:

Limit Buy = $3.20

and wait to see whether the market trades at that price.

Stop Order

An order that is triggered after a specified stop price is reached.

Option prices can move very quickly, so Stop Orders on options require extra care.

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38. Slippage

Suppose you expect to trade at:

$3.00

but actually execute at:

$3.20

The difference:

$0.20

is slippage.

If an option has a wide Bid/Ask spread, slippage can be significant.

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39. Early Assignment

American-style options can be exercised before expiration.

Therefore, a trader who is short an option may be assigned before expiration.

Situations with increased early-assignment risk can include:

• Deep ITM options
• Options close to an Ex-dividend Date
• Options with very little remaining extrinsic value

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40. Ex-dividend Date and Options

Shareholders may receive dividends if they meet the relevant ownership requirements.

Simply holding a Call does not normally entitle you directly to the stock’s dividend.

A Deep ITM Call near an Ex-dividend Date can create additional early-exercise and early-assignment considerations.

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41. Time Decay

As an option approaches expiration:

There is less time remaining for the option to benefit from future price movement, so its extrinsic value generally declines.

Theta decay is not usually linear.

For example:

90 DTE:

Time decay is generally slower.

20 DTE:

Time decay often becomes faster.

During the final few days:

The extrinsic value of an ATM option can decay very quickly.

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42. Volatility Crush

A volatility crush is common around earnings announcements.

Example:

Before earnings:

IV = 70%

After earnings:

IV = 35%

Even if the stock rises, a Call can still lose value.

Why?

The gain from:

Stock Movement

may not be enough to offset:

IV Collapse + Theta

This is why:

Being right about the direction does not guarantee that an option trade will be profitable.

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43. Expected Move

Option prices can be used to estimate the market-implied expected price movement over a particular period.

Example:

Stock:

$100

Expected one-week move:

±$8

A rough implied range is:

$92 – $108

Important:

Expected Move is a probability-based estimate, not a guarantee that the stock will remain within the range.

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44. Probability of Profit / Probability ITM

Some platforms display metrics such as:

• Probability of Profit
• Probability ITM
• Probability OTM

These are model-based estimates.

They can depend on:

• IV
• Time remaining
• Strike price
• Model assumptions

They are not guarantees.

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45. Max Profit / Max Loss

Before entering any strategy, you should understand:

Maximum Profit
Maximum Loss
Break-even

For a Long Call:

Maximum loss:

Premium Paid

Maximum profit:

Theoretically unlimited.

For a Long Put:

Maximum loss:

Premium Paid

Maximum profit is limited because a stock cannot fall below $0.

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46. Covered Call

A Covered Call is:

Own 100 Shares
+
Sell 1 Call

Typical goals include:

• Collecting premium
• Being willing to sell the shares at the Call strike price

Risk:

If the stock falls sharply, the premium received only offsets a small part of the stock loss.

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47. Cash-Secured Put

You:

Sell Put

and hold enough cash to buy 100 shares if assigned.

Example:

Strike = $90

You would generally reserve:

$90 × 100 = $9,000

After accounting for the premium received, the effective cost basis would be lower.

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48. Protective Put

You own shares and also buy a Put:

Own Stock + Long Put

This is similar to buying insurance for the stock position.

If the stock falls sharply, the Put may gain value and limit part of the downside.

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49. Vertical Spread

A Vertical Spread uses options with:

• The same expiration date
• Different strike prices

You buy one option and sell another.

Example:

Buy 100 Call
Sell 110 Call

This can reduce the upfront cost while also limiting the maximum profit.

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50. Bull Call / Bear Put Spread

Bull Call Spread

A bullish strategy:

Buy Lower Strike Call
Sell Higher Strike Call

Bear Put Spread

A bearish strategy:

Buy Higher Strike Put
Sell Lower Strike Put

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51. Credit Spread / Debit Spread

Debit Spread

You pay money when opening the position.

Example:

A Bull Call Spread.

Credit Spread

You receive money when opening the position.

Examples include:

Bull Put Spread
Bear Call Spread

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52. Straddle / Strangle

Long Straddle

Buy:

ATM Call + ATM Put

The position benefits from a sufficiently large move, but you do not have to know the direction in advance.

Long Strangle

Buy:

OTM Call + OTM Put

It usually costs less than a Straddle, but normally requires a larger move in the underlying to become profitable.

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53. Iron Condor

An Iron Condor is generally built from two Credit Spreads.

It is typically used when:

You expect the underlying price to remain within a range.

Characteristics:

• Limited profit
• Limited loss

However, traders still need to manage:

• Assignment risk
• Liquidity risk
• IV risk

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54. Calendar Spread

A Calendar Spread uses options with:

• The same strike
• Different expiration dates

Example:

Sell 30-day Call
Buy 90-day Call

The strategy is influenced heavily by:

• Differences in Theta
• IV term structure

This is a more advanced options strategy.

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55. LEAPS

LEAPS generally refers to long-dated options.

For example:

Options with a year or more until expiration.

Advantages:

• Theta decay is often slower than for short-dated options

Disadvantages:

• Premiums are usually higher
• IV, Delta, and time-decay risks still exist

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56. 0DTE / DTE

DTE = Days To Expiration

Example:

30 DTE

means 30 days until expiration.

0DTE:

An option that expires on the same trading day.

0DTE options can have:

• Very high Gamma
• Very rapid Theta decay
• Extremely fast price changes
• Very high risk

Beginners should be especially careful with 0DTE options.

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57. Pin Risk

Pin Risk can occur when the stock price is very close to an option strike at expiration.

Example:

Strike = $100
Stock close ≈ $100

It may be unclear whether a particular option will ultimately be exercised or assigned.

That uncertainty is known as Pin Risk.

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58. Margin

Short options often involve margin requirements.

A broker may require capital to support the potential risk of the position.

Margin requirements can change with:

• Stock price
• IV
• Market risk
• Position structure

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59. Buying Power

Buying Power means:

How much remaining capital or margin capacity is available in the brokerage account for new positions.

Short options can consume a significant amount of Buying Power.

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60. Naked Option

Naked Call

Selling a Call without owning 100 shares to cover the obligation.

Theoretically:

Maximum loss is unlimited.

Naked Put

Selling a Put without fully securing the obligation with cash.

If the stock collapses, losses can be substantial.

Naked option selling is generally a high-risk strategy for beginners.

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61. Practical Option Greeks Example

Assume ORCL is trading at:

Stock Price = $150

Call:
Strike = $155
Expiration = 30 days
Premium = $4.00

Delta = 0.45
Gamma = 0.04
Theta = -0.08
Vega = 0.12
IV = 35%

Scenario A: ORCL Rises by $1

Using Delta as an approximation:

Option +$0.45

So:

$4.00 → approximately $4.45

However, the actual option price is still affected by the other variables.

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Scenario B: Delta Changes as the Stock Moves

Gamma:

0.04

If the stock rises by $1:

Delta ≈ 0.49

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Scenario C: One Day Passes

Theta:

-$0.08

Assuming other factors remain unchanged:

$4.00 → approximately $3.92

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Scenario D: IV Rises by 5 Percentage Points

Vega:

0.12

Therefore:

0.12 × 5 = $0.60

The option may theoretically gain:

+$0.60

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Most Important Idea

An option’s price is affected by several factors at the same time:

Stock movement
+ Delta
+ Gamma
+ Theta
+ Vega / IV
+ Interest rates
+ Supply / demand

Therefore:

A stock can rise while its Call falls.
A stock can fall while its Put falls.

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62. What to Check Before Buying an Option

A beginner should check at least the following:

1. Underlying Price

The current price of the stock or underlying asset.

2. Strike

The option’s strike price.

3. Expiration

The option’s expiration date.

4. DTE

How many days remain until expiration.

5. Bid / Ask

The current market quotes.

6. Spread

Be careful if the spread is too wide.

7. Volume

Today’s trading volume.

8. Open Interest

The number of outstanding open contracts.

9. IV

Whether implied volatility is relatively high or low.

10. Delta

How sensitive the option is to changes in the underlying price.

11. Theta

How much value may be lost from time passing.

12. Vega

How sensitive the option is to changes in IV.

13. Earnings Date

IV can change dramatically before and after earnings.

14. Break-even

Where the underlying needs to be at expiration for the trade to break even.

15. Max Loss

The maximum amount the strategy can lose.

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63. Common Misunderstandings

Misunderstanding 1: If the Stock Rises, the Call Must Rise

Wrong.

If:

IV falls sharply
+
Theta loss

is larger than the gain from Delta, the Call can still fall.

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Misunderstanding 2: A Cheap Option Must Be Good Value

Not necessarily.

A $0.10 OTM option may be close to worthless.

A low price does not automatically mean good value.

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Misunderstanding 3: If the Stock Rises Above the Strike Before Expiration, I Must Make Money

Not necessarily.

Example:

Strike = $100
Premium = $8

At expiration, the stock is:

$105

Intrinsic value:

$5

But you paid:

$8

So you still lose:

$3/share

The break-even price is:

$108

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Misunderstanding 4: Buying Options Means I Can Only Lose a Small Amount

For a Long Option, maximum loss is usually limited to the premium paid.

However:

The premium can fall to $0.

That means the option buyer can lose 100% of the amount invested in the premium.

If you commit a large amount of capital, the total loss can still be substantial.

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Misunderstanding 5: High Open Interest Means the Option Is Safe

No.

High OI only shows that there are many open contracts.

It does not mean:

• The option is fairly priced
• The trade will be profitable
• The position is low risk

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Misunderstanding 6: Delta Equals the True Probability of Success

No.

Delta is sometimes used as a rough proxy for Probability ITM, but it is not a guaranteed or exact probability of success.

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64. Quick Terminology Reference

Term	Simple Meaning
Option	A time-limited financial contract giving specified rights
Call	An option giving the right to buy
Put	An option giving the right to sell
Strike	The contract’s specified exercise price
Expiration	The date the option expires
Premium	The price of the option
Contract	A standard U.S. equity option usually represents 100 shares
ITM	In the Money; the option has intrinsic value
ATM	At the Money; strike is near the current underlying price
OTM	Out of the Money; the option has no intrinsic value
Intrinsic Value	Immediate exercise value
Extrinsic Value	Value from time, volatility, and other factors
IV	Implied Volatility; market-implied future volatility
HV	Historical Volatility; past realized volatility
Delta	Approximate option-price sensitivity to a $1 move in the underlying
Gamma	Rate of change of Delta
Theta	Sensitivity to the passage of time
Vega	Sensitivity to changes in IV
Rho	Sensitivity to interest rates
Alpha	Excess return; not a major Option Greek
Beta	Sensitivity relative to the broader market
Bid	Highest current price a buyer is willing to pay
Ask	Lowest current price a seller is willing to accept
Spread	Ask minus Bid
Volume	Number of contracts traded during the session
Open Interest	Number of outstanding open contracts
Liquidity	How easily the option can be traded
DTE	Days To Expiration
Exercise	Use the option’s contractual right
Assignment	An option seller is required to fulfil the contract
Long	Buyer position
Short	Seller position
Buy to Open	Open a Long Option position
Sell to Close	Close a Long Option position
Sell to Open	Open a Short Option position
Buy to Close	Close a Short Option position
Margin	Capital required by the broker to support risk
Buying Power	Remaining capital or margin capacity for new trades
Leverage	Using less capital to obtain larger market exposure
Slippage	Difference between expected and actual execution price
IV Crush	Sharp decline in IV that reduces option value
Time Decay	Loss of extrinsic value as expiration approaches
Break-even	Price at which the position breaks even at expiration
Max Profit	Maximum possible profit of the strategy
Max Loss	Maximum possible loss of the strategy
Covered Call	Own shares and sell a Call against them
Cash-Secured Put	Sell a Put while reserving enough cash for assignment
Protective Put	Own stock and buy a Put for downside protection
Vertical Spread	Same expiration, different strikes
Debit Spread	A spread entered for a net debit
Credit Spread	A spread entered for a net credit
Straddle	Buy a Call and Put with the same strike
Strangle	Buy an OTM Call and OTM Put with different strikes
Iron Condor	Range-based, limited-risk spread strategy
LEAPS	Long-dated options
0DTE	Option expiring on the same trading day

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Recommended Learning Order for Options

If you are starting from zero, a useful learning sequence is:

Step 1
Call / Put

Step 2
Strike / Expiration / Premium

Step 3
ITM / ATM / OTM

Step 4
Intrinsic / Extrinsic Value

Step 5
Bid / Ask / Spread / Volume / OI

Step 6
Delta / Theta

Step 7
Gamma / Vega / IV

Step 8
Exercise / Assignment

Step 9
Long Call / Long Put

Step 10
Covered Call / Cash-Secured Put

Step 11
Vertical Spreads

Step 12
Other Advanced Strategies

If you remember only one sentence:

Options trading is not simply about predicting whether a stock will rise or fall. You are also dealing with direction, magnitude, time, and volatility.

You can be correct about the direction and still lose money because of time decay or changes in IV.

Therefore, before learning complicated strategies, make sure you genuinely understand:

Premium
Delta
Theta
Vega
IV
Expiration
Liquidity
Risk