Call Option:
- A call option gives the holder the right, but not the obligation, to buy an underlying asset at a specified price (strike price) before or at the expiration date.
Put Option:
- A put option gives the holder the right, but not the obligation, to sell an underlying asset at a specified price (strike price) before or at the expiration date.
Strike Price:
- The price at which the option holder can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.
Expiration Date:
- The date at which the option contract expires. After this date, the option is no longer valid.
Premium:
- The price paid by the option buyer to the option seller for the right to buy or sell the underlying asset. It represents the cost of the option.
In-the-Money (ITM), At-the-Money (ATM), Out-of-the-Money (OTM):
- Options that have intrinsic value are considered in-the-money. At-the-money options have a strike price equal to the current market price of the underlying asset. Out-of-the-money options have no intrinsic value.
Implied Volatility (IV):
- A measure of the market's expectation of the future volatility of the underlying asset. High implied volatility often corresponds to higher option premiums.
Delta, Gamma, Theta, Vega (Option Greeks):
- These are measures that help traders understand how the option price is likely to change concerning changes in various factors such as the price of the underlying asset, time, and volatility.
Covered Call:
- An options strategy where an investor holds a long position in an asset and sells call options on that same asset.
Protective Put:
- An options strategy where an investor buys a put option to protect against a decline in the value of an underlying asset.
Remember, options trading can be complex and involves risk. It's crucial to thoroughly understand these concepts, conduct research, and possibly seek advice from financial professionals before engaging in options trading.
