Options Trading Glossary
Every term you'll encounter on OptionsDeck and across the options market. Plain English. No fluff.
The options market has its own dense vocabulary. This glossary is the single source of truth for every term you'll encounter inside OptionsDeck — written by traders for traders, not by an SEO content farm.
ATM (At-The-Money)
An option whose strike price is at or very close to the current price of the underlying stock.
Aggressor classification
Tagging each options print as buyer-initiated (executed at/above ask) or seller-initiated (at/below bid). The most important context for reading flow.
Backwardation
When near-term IV is higher than longer-term IV. Indicates short-term fear or a known catalyst.
Bid/Ask spread
The gap between the highest buy offer and lowest sell offer. Tight spreads = liquid contract. Wide spreads = illiquid, hard to fill.
Bull call spread
Buy a lower-strike call + sell a higher-strike call, same expiration. Defined-risk bullish trade. See our full guide on bull call spreads.
Call wall
A strike with very large positive dealer gamma. Acts as resistance because dealers sell into rallies approaching it.
Contango
When longer-term IV is higher than near-term IV. Normal regime for equity options.
Covered call
Holding 100 shares of stock and selling one call against it. Generates income but caps upside.
Credit spread
An options spread where you receive net premium upfront. Profits from time decay if the underlying stays on your side.
Debit spread
An options spread where you pay net premium upfront. Profits if the underlying moves in your direction.
Delta
The rate of change of an option's price per $1 move in the underlying. A 0.50-delta call moves $0.50 for every $1 the stock moves up.
DTE (Days To Expiration)
Number of calendar days until the option expires. 0DTE = expires today.
Dark pool
Off-exchange venue where large institutional trades execute without showing on the public tape until after the fact.
Gamma
The rate of change of delta. High-gamma options accelerate fast when the underlying moves.
Gamma flip
The strike price where aggregate dealer gamma transitions from positive to negative. Above the flip → vol suppressed. Below → vol expansion.
Gamma squeeze
When buying pressure forces market-maker hedging into stock purchases, accelerating the move upward in a self-reinforcing loop.
GEX (Gamma Exposure)
Aggregate dealer gamma position across all strikes. Drives intraday volatility character.
Greeks
Sensitivity metrics for an options position: delta (price), gamma (delta change), theta (time decay), vega (IV sensitivity), rho (rate sensitivity).
HV (Historical Volatility)
Realized volatility computed from past price moves. Compare to IV to see if options are cheap or expensive.
Implied move
The market's expected one-standard-deviation move by a given expiration, computed from ATM straddle pricing.
Iron butterfly
Sell ATM straddle + buy protective wings. Pinned-to-strike premium-seller. Max profit if underlying expires exactly at short strike.
Iron condor
Sell OTM put spread + sell OTM call spread. Range-bound premium seller. Profitable if underlying stays inside the inner strikes.
ITM (In-The-Money)
Calls with strike below spot, or puts with strike above spot. Have intrinsic value.
IV (Implied Volatility)
The market's forward forecast of annualized volatility, derived from option prices.
IV rank
Where current IV sits within the 52-week IV range, as a percent. 0 = at low, 100 = at high.
IV percentile
Percent of trading days in the last 252 where IV was at or below current. More robust than IV rank when there's been a single spike.
Kelly criterion
Position-sizing formula that maximizes long-run geometric growth. OptionsDeck's position sizer uses it as one input.
Long call
Pay premium for the right to buy stock at the strike. Unlimited upside, max loss = premium paid.
Long put
Pay premium for the right to sell stock at the strike. Profits from downside, max loss = premium paid.
Long straddle
Buy ATM call + buy ATM put. Long vol — profits on a large move in either direction.
MACD
Moving Average Convergence Divergence — momentum indicator. Bullish when MACD line crosses above signal line, bearish below.
NBBO
National Best Bid and Offer — the consolidated best bid and ask across all US exchanges at any millisecond.
0DTE (Zero Days to Expiration)
Options expiring today. SPY, QQQ, SPX all have daily expirations. High gamma + high theta = wild swings.
OI (Open Interest)
Total number of outstanding contracts at a strike. High OI = liquid. OptionsDeck's contract picker requires ≥25 OI to consider a contract fillable.
OPEX (Options Expiration)
Monthly options expiration, typically the third Friday. Gamma unwinds, dealer hedging pressure releases, often pins indices into the close.
OTM (Out-Of-The-Money)
Calls with strike above spot, puts with strike below spot. No intrinsic value, all extrinsic.
POP (Probability Of Profit)
Statistical probability that a structure will be profitable at expiration. OptionsDeck computes via Monte Carlo.
Put wall
A strike with very large negative dealer gamma. Acts as support because dealers buy into declines near it.
Put/Call ratio
Total put volume divided by total call volume. >1.0 = bearish skew, <0.7 = bullish skew.
Risk of ruin
Probability of experiencing a critical drawdown given your win rate, position sizing, and trade count.
Sweep
An order that intentionally executes across multiple exchanges in the same second to fill size quickly. Strong signal of urgent institutional intent.
Theta
Rate of option value decay per day. Long options lose theta, short options collect it.
Vega
Sensitivity of option price to a 1-point change in IV. Long options are long vega, short options are short vega.
VIX
30-day forward IV of SPX. The 'fear gauge'. Spikes during stress.
VIX term structure
VIX values across multiple horizons (VIX9D, VIX, VIX3M, VIX6M). Inverted = near-term fear.
Vol crush
Rapid collapse in IV after a known event (earnings, FOMC). Why naked premium buyers around catalysts often lose even when right on direction.
Vol/OI ratio
Today's volume divided by total open interest at a strike. >2 means a position much larger than what already existed is being opened.
Walk-forward backtest
Out-of-sample simulation that progressively re-fits parameters on past data and tests on future data. OptionsDeck's backtester uses this approach.
Frequently asked questions
How is this glossary different from Investopedia?
These definitions are written for active operators. They focus on how each concept is used in actual trading workflows — what to look for, what to ignore, what's a signal vs noise.
Are these terms used inside OptionsDeck?
Yes. Every term here appears somewhere in the OptionsDeck platform — in the AI strategist's thesis, the GEX dashboard, the flow scanner, or the trade builder.
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