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Options
48 guides in Finabase Learn
- American-style option An option that can be exercised on any business day up to expiration; most US single-stock options are American style.
- Assignment The notice that an option seller must fulfill the contract: deliver shares on a short call or buy shares on a short put.
- At the money (ATM) An option whose strike price equals, or is very close to, the current price of the underlying asset.
- Call option A contract giving the buyer the right, not the obligation, to buy the underlying asset at the strike price before expiration.
- Cash-secured put Selling a put option while holding enough cash to buy the shares if assigned, collecting premium in the meantime.
- Cash-secured puts: mechanics, payoff and the obligation to buy How selling a cash-secured put works, what it can earn and lose, what the obligation to buy shares means in practice, and how it compares with a covered call.
- Covered Call Selling a call option against shares already owned, collecting premium in exchange for capping the upside above the strike.
- Covered calls: how they work, payoff, and assignment risk How a covered call combines owned shares with a sold call, what it can earn and lose, why the upside is capped, and what happens when the shares are called away.
- Credit spread (options) An options position that sells one option and buys a further out-of-the-money one, collecting a net premium with capped risk.
- Delta How much an option's price is expected to change for a $1 move in the underlying; also a rough probability of finishing in the money.
- Derivative A contract whose value depends on another asset, rate or index, such as options, futures and swaps.
- Derivatives explained: forwards, futures, options and swaps What a derivative is, how the four basic contracts differ, notional value, hedging versus speculation, counterparty risk and clearing, with worked dollar examples.
- European-style option An option that can be exercised only at expiration; most index options such as SPX are European style.
- Exercise Using the right an option grants: buying the underlying with a call or selling it with a put at the strike price.
- Expiration date The last day an option or futures contract is valid, after which it is exercised, settled or expires worthless.
- Gamma The rate at which an option's delta changes for a $1 move in the underlying, highest for at-the-money options near expiry.
- Implied volatility The future volatility the market is pricing into an option, backed out from its premium with a pricing model.
- In the money (ITM) A call with a strike below the underlying price, or a put with a strike above it; the option has intrinsic value.
- Intrinsic value The estimated true worth of a business from its fundamentals; for an option, the amount by which it is in the money.
- Iron condor A four-leg options strategy that sells an out-of-the-money put spread and call spread, profiting if price stays in a range.
- Naked option Selling an option without owning the underlying or an offsetting position; a naked call has theoretically unlimited risk.
- Open interest The number of option or futures contracts outstanding that have not yet been closed, exercised or expired.
- Option A contract that gives the holder the right, but not the obligation, to buy or sell an asset at a set price before a set date.
- Option chain A table listing all available option contracts for an underlying, by expiration and strike, with bids, asks, volume and open interest.
- Option exercise and assignment: how it works and when it happens How option exercise works, how OCC assigns sellers at random, the expiration-day cut-off and auto-exercise rule, early assignment before dividends, and pin risk.
- Option Greeks Delta, gamma, theta, vega and rho: measures of how an option's price responds to changes in price, time, volatility and rates.
- Option Greeks: delta, gamma, theta, vega and rho with examples What each option Greek measures, how to read delta, gamma, theta, vega and rho on a real position, and worked examples computed from the Black-Scholes model.
- Option moneyness: in, at and out of the money explained How to tell whether a call or put is in, at or out of the money, and how to split any option premium into intrinsic value and time value, with worked tables.
- Option premium The price paid by an option buyer to the seller, made up of intrinsic value plus time value.
- Option premium and time value: decay, volatility and Black-Scholes What drives an option premium, why time value melts faster near expiration, what implied volatility measures, and the intuition behind the Black-Scholes model.
- Options basics: how calls and puts work, with payoff diagrams What call and put options are, how strike, expiration and premium fit together, what buyers and sellers owe each other, and how to read a payoff diagram.
- Options risks and approval levels: what brokers check and why How US brokers approve options accounts under FINRA Rule 2360, what approval tiers usually allow, and the main risks: leverage, undefined loss and liquidity.
- Out of the money (OTM) An option with no intrinsic value: a call whose strike is above the stock price, or a put whose strike is below it.
- Protective put Buying a put option on a stock you own so that losses below the strike price are capped, in exchange for the premium paid.
- Put option A contract giving the buyer the right, but not the obligation, to sell 100 shares of a stock at a set strike price before expiration.
- Put-call ratio The volume (or open interest) of put options divided by that of calls, read as a gauge of how bearish or hedged options traders are.
- Rho The option Greek measuring how much an option’s price changes for a one-percentage-point move in interest rates.
- Straddle An options position that buys (or sells) a call and a put with the same strike and expiration, a bet on how much a stock moves rather than which way.
- Strike price The fixed price at which an option holder can buy (call) or sell (put) the underlying asset, set when the contract is created.
- Theta The option Greek that estimates how much an option’s price falls with each day that passes, all else equal; the measure of time decay.
- Time value The part of an option’s premium above its intrinsic value: what buyers pay for the chance the option gains value before it expires.
- Trading earnings season: implied moves, IV crush and earnings gaps How earnings season works, how to read the market’s implied move from options, why implied volatility collapses after reports, and what real earnings gaps look like.
- Underlying asset The stock, index, commodity, currency or other asset whose price determines the value of a derivative such as an option or futures contract.
- Vega The option Greek that estimates how much an option’s price changes for each one-point change in implied volatility.
- Vertical spreads: bull call, bear put and credit spreads explained How vertical option spreads work, how to compute maximum profit, maximum loss and break-even for debit and credit spreads, and the risks that remain.
- VIX Cboe's volatility index, computed from S&P 500 option prices, measuring the market's expected 30-day volatility; often called the fear gauge.
- Volatility How much and how quickly a price moves up and down, usually measured as the annualized standard deviation of returns, historical or implied.
- Volatility and the VIX: historical vs implied volatility explained How historical and implied volatility differ, what the Cboe VIX measures and how it is built, what its 1990–2026 history shows, and why VIX products behave differently.
Educational content, not investment advice. Finabase Learn explains how markets and tools work. It does not recommend any security or strategy, and examples are for illustration only. Investing involves risk, including the loss of principal. Rules and figures are for the United States unless stated and can change — check the cited source before you act.