Options Glossary
Plain-language definitions of essential options terms.
Assignment
The process through which an option seller is selected to fulfill the contractual obligation after a holder exercises.
At the Money
A description used when the underlying price is near the option strike price.
Bid
A displayed price associated with what a buyer is willing to pay at that moment.
Break-even
A price at a specified measurement point where the simplified strategy profit and loss equals zero.
Call Option
A contract that generally gives the holder the right to buy the underlying at the strike under the contract terms.
Contract Multiplier
The number used to translate a quoted option premium into contract value; standard U.S. equity options commonly use 100, but adjustments occur.
Delta
A model-based estimate of option-value sensitivity to a one-unit move in the underlying.
Exercise
The holder’s use of an option’s contractual right under applicable rules.
Expiration
The date or time after which the option contract ceases to exist.
Extrinsic Value
The portion of option premium beyond intrinsic value, associated with time, volatility, and other pricing inputs.
Gamma
A model-based estimate of how delta changes when the underlying price changes.
Historical Volatility
A measurement of realized price variation over a selected historical period.
Implied Volatility
A volatility input consistent with observed market prices under an options-pricing model.
In the Money
A call with underlying price above its strike or a put with underlying price below its strike.
Intrinsic Value
The amount by which an option is in the money, without considering premium originally paid.
Open Interest
The number of option contracts reported as open under exchange and clearing accounting.
Out of the Money
A call with underlying price below its strike or a put with underlying price above its strike.
Premium
The price paid by an option buyer and received by an option seller, quoted per share unless otherwise specified.
Put Option
A contract that generally gives the holder the right to sell the underlying at the strike under the contract terms.
Rho
A model-based estimate of option-value sensitivity to interest-rate changes.
Strike Price
The contract price associated with buying or selling the underlying upon exercise.
Theta
A model-based estimate of the effect of time passing on option value with other inputs held constant.
Underlying
The security, index, fund, future, or other reference to which an option contract is linked.
Vega
A model-based estimate of option-value sensitivity to changes in implied volatility.
Volume
The number of contracts reported traded during a selected session or period.