Glossary

Options basics

Option. A contract giving the right, but not the obligation, to buy or sell 100 shares of a stock at a set price by a set date.

Call. An option to buy the underlying at the strike price. Buyers profit if the stock rises; sellers collect a premium.

Put. An option to sell the underlying at the strike price. Buyers profit if the stock falls; sellers collect a premium.

Premium. The price of an option. Sellers receive it upfront as income; buyers pay it for the right the option confers.

Strike price. The fixed price at which the option can be exercised.

Expiration. The date the option contract ends. After it, an unexercised option is worthless.

DTE. Days to expiration: how many days remain until the option expires.

Assignment. When the seller of an option is required to fulfill the contract, buying or selling the shares.

Exercise. When the holder of an option uses their right to buy or sell the underlying at the strike.

Moneyness and Greeks

In the money (ITM). An option with intrinsic value, e.g. a call whose strike is below the current stock price.

Out of the money (OTM). An option with no intrinsic value, e.g. a call whose strike is above the current stock price.

At the money (ATM). An option whose strike is roughly equal to the current stock price.

Delta. How much an option’s price is expected to move for a $1 move in the underlying; often used as a rough probability estimate.

Theta. The rate at which an option loses value each day as expiration approaches (time decay).

Implied volatility (IV). The market’s expectation of future movement, priced into the option. Higher IV means richer premiums and more risk.

Income strategies

Covered call. Selling a call against 100 shares you already own to collect premium, capping upside in exchange for income. See the payoff →

Cash-secured put. Selling a put while setting aside enough cash to buy the shares if assigned. You collect premium and may buy the stock at a discount. See the payoff →

The wheel. A repeating cycle of selling cash-secured puts, taking assignment, then selling covered calls on the resulting shares. See the payoff →

Collateral. The cash or shares set aside to back an options position, such as the cash reserved for a cash-secured put.

Spread. A position combining two or more options to define risk and reward, such as a bull put spread or iron condor.

Iron condor. A defined-risk strategy that sells an out-of-the-money call spread and put spread to profit from a stock staying in a range. See the payoff →

Metrics in Denaras

Monthly income. The estimated premium a plan would generate in a month, based on current data. It is a model, not a guarantee.

Annualized yield. The estimated return expressed on a yearly basis, useful for comparing plans of different lengths.

% before loss. A rough buffer showing how far the stock could move against you before the position starts losing money.

Credit at risk. The net premium already collected on open positions that you keep if they expire worthless.

Max obligation. The cash you would need if every open short put were assigned: your worst-case obligation.