Options Trading Glossary
22 essential options terms explained for Indian markets — every Greek, volatility measure, option-chain metric and pricing concept, with a plain-English definition and a Nifty or BankNifty example.
Option Greeks
DeltaΔ
Delta measures how much an option's price changes for a ₹1 move in the underlying — and approximates the probability of expiring in-the-money.
GammaΓ
Gamma measures how fast an option's Delta changes for a ₹1 move in the underlying — the acceleration behind directional exposure.
Rhoρ
Rho measures how much an option's premium changes for a 1% change in the risk-free interest rate — the smallest Greek for short-dated options.
Vegaν
Vega measures how much an option's premium changes for a 1% change in implied volatility — your exposure to fear and uncertainty.
Volatility
Historical VolatilityHV
Historical Volatility is the actual, realised volatility of the underlying computed from past price data — a backward-looking benchmark.
IV Crush
IV Crush is the sharp drop in implied volatility right after a known event resolves, deflating option premiums regardless of direction.
Volatility Smile
A Volatility Smile is the U-shaped curve where both deep out-of-the-money calls and puts carry higher implied volatility than at-the-money options.
Pricing & Moneyness
At-the-MoneyATM
An at-the-money option has a strike price approximately equal to the current spot price of the underlying.
In-the-MoneyITM
An in-the-money option has intrinsic value — a call with strike below spot, or a put with strike above spot.
Intrinsic Value
Intrinsic Value is the in-the-money portion of an option's price — what it would be worth if exercised right now.
Moneyness
Moneyness describes where a strike sits relative to the spot price — in-the-money, at-the-money, or out-of-the-money.
Option PremiumLTP
Option Premium is the price a buyer pays the seller for an option — made up of intrinsic value plus time value.
Out-of-the-MoneyOTM
An out-of-the-money option has no intrinsic value — a call with strike above spot, or a put with strike below spot.
Time Value
Time Value is the portion of an option's premium above its intrinsic value — payment for time and volatility remaining until expiry.
Option Chain & OI
General Terms
Assignment
Assignment is the obligation imposed on an option seller to fulfil the contract when the buyer exercises it.
Bid-Ask Spread
The Bid-Ask Spread is the gap between the highest price buyers will pay and the lowest price sellers will accept — a direct measure of liquidity and trading cost.
Exercise
Exercise is the act of invoking an option's right to buy (call) or sell (put) the underlying at the strike price.
Expiry
Expiry is the date on which an option contract ceases to exist and is settled — after which it has no further value.
Lot Size
Lot Size is the fixed number of units in one options contract — the multiplier that scales premium, P&L, and margin.
Strike Price
The Strike Price is the fixed price at which an option can be exercised — the reference level for whether it is in or out of the money.
Put These Terms to Work
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