Derivatives
Options, futures, and other derivative instruments.
Options, futures, and other derivative instruments.
32 terms in this category
C
Call Option
A call option gives the buyer the right, but not obligation, to buy an asset at a specific price before expiration.
Covered Call
A covered call involves owning stock and selling call options against it, collecting premium income while capping upside potential.
Credit Spread
A credit spread involves selling one option and buying another at a different strike for a net credit, with defined risk and profit.
D
F
Funding Rate
Funding rate is the periodic payment exchanged between long and short holders in perpetual futures contracts to keep the contract price anchored to the underlying spot price.
Futures Contract
A futures contract is an agreement to buy or sell an asset at a predetermined price on a specific future date, with both parties obligated.
G
I
Implied Volatility
Implied volatility is the market's expectation of future price movement, reflected in option prices. Higher IV means more expensive options.
In The Money (ITM)
An option is in the money when exercising it would be profitable—calls when stock exceeds strike, puts when stock is below strike.
Intrinsic Value
Intrinsic value is the amount by which an option is in the money—the difference between stock price and strike price if profitable.
Iron Condor
An iron condor is a neutral options strategy using four options to profit from low volatility within a defined price range.
IV Crush
IV crush is the sharp decline in implied volatility after an event like earnings, causing option prices to drop even if the stock moves your way.
O
P
Perpetual Futures
Perpetual futures is a derivative contract with no expiration date, kept near spot price via periodic funding rate payments between longs and shorts.
Premium (Options)
Premium is the price paid to buy an option, consisting of intrinsic value plus time value. It's what option buyers pay and sellers receive.
Protective Put
A protective put involves owning stock and buying put options as insurance, limiting downside risk while keeping upside potential.
Put Option
A put option gives the buyer the right, but not obligation, to sell an asset at a specific price before expiration.
Put-Call Ratio
Put-Call Ratio is the volume of put options divided by call options, used to gauge market sentiment — readings above 1.0 signal fear, below 0.5 signal speculative excess.
S
Straddle
A straddle involves buying a call and put at the same strike and expiration, profiting from big moves in either direction.
Strangle
A strangle involves buying OTM call and put options at different strikes, profiting from very large moves in either direction.
Strike Price
Strike price is the predetermined price at which an option holder can buy (call) or sell (put) the underlying asset.
T
Theta
Theta measures how much an option loses in value each day due to time decay, expressed as dollars lost per day.
Theta Decay
Theta decay is the accelerating erosion of an option's extrinsic value over time, moving non-linearly and collapsing dramatically in the final 30 days before expiration.
Time Value
Time value is the portion of an option's premium above its intrinsic value, reflecting the probability of favorable movement before expiration.