Glossary
American-Style Option
An option that can be exercised any time up to and including the expiration date.
Ask
Price at which an option or stock is offered for sale
At-the-Money (ATM)
Option's strike price equal to the underlying asset's market price.
Bid
Price at which an option or stock is available for purchase
Black-Scholes Model
Model used to calculate European-style options prices
Break-Even Point
Price at which an option position neither gains nor loses value
Butterfly Spread
Options strategy with limited risk and profit potential
Calendar Spread
Options strategy involving options with same strike price but different expiration dates
Call Option
Contract giving the right to buy an asset at a specified price
Collar
Options strategy to limit risk and potential profit
Covered Call
Options strategy involving a long position and selling a call option
Delta
Measure of an option's price sensitivity to the underlying asset's price
European-Style Option
Option that can only be exercised on its expiration date
Extrinsic Value
Portion of option's price attributed to factors other than intrinsic value
Gamma
Measure of the rate of change of an option's delta
Greeks
Measures of risk in options pricing
Implied Volatility
Measure of expected volatility of the underlying asset
In-the-Money (ITM)
Option with strike price favorable relative to the underlying asset's market price
Intrinsic Value
Value of an option if exercised immediately
Iron Condor
Options strategy involving selling out-of-the-money calls and puts
Long position
a long position in a financial instrument means the holder of the position owns a positive amount of the instrument.
Margin
The amount of money or collateral that an investor must deposit with a broker to cover potential losses on an options position.
Naked Option
Selling option without owning the underlying
Notional Value of an Option
Theoretical value of the underlying asset represented by an option
Option chain
A list of options available for a specific underlying asset
Option Premium
The price paid by the buyer of an option to the seller.
Out of the Money
An option with no intrinsic value
Panoption
A perpetual, oracle-less, decentralized, option based on Uniswap V3.
Perpetual Options
Options with no expiration date
Price Oracles in Blockchains
External data providers for blockchain-based smart contracts
Put Option
A contract that gives the holder the right, but not the obligation, to sell an underlying asset at a specified price (strike price)
Range (Uniswap V3)
The range where users provide liquidity
Short Position
Strategy betting on a decline in an asset's price
Streaming Premia
The way Panption sellers collect fees
Theta
Measure of an option's price sensitivity to time decay
Volatility Smile
Implied volatility pattern across options with different strike prices