Glossary

An option whose strike price is equal (or closest) to the current price of the underlying. ATM options have the highest time value.

An option that already has intrinsic value - a call below the spot, or a put above the spot. If exercised now it would pay off.

An option with no intrinsic value - a call above the spot, or a put below the spot. Its premium is pure time value.

A contract giving the buyer the right (not obligation) to BUY the underlying at the strike price before expiry. Bought when you expect prices to rise.

A contract giving the buyer the right (not obligation) to SELL the underlying at the strike price before expiry. Bought when you expect prices to fall.

The price you pay to buy an option (or receive when you sell one). It is made up of intrinsic value plus time value.

The fixed price at which the option holder can buy (call) or sell (put) the underlying. Listed across the option chain.

The last date on which an option contract is valid. Indian index options expire weekly; stock options expire monthly (last Thursday).

The fixed quantity of the underlying in one F&O contract. You can only trade in multiples of the lot - e.g. NIFTY trades in lots of 75.

Measures how much an option price moves for a ₹1 move in the underlying. Calls have +Delta (0 to 1), puts have −Delta (0 to −1).

Measures how much premium an option loses each day from time decay. Theta is negative for buyers and works in favour of sellers.

Measures how much an option price changes for a 1% change in implied volatility. High Vega means the option is sensitive to volatility swings.

Measures how fast Delta itself changes as the underlying moves. Gamma is highest for ATM options near expiry, making them very reactive.

The market's forecast of future volatility, derived from the option's price. Higher IV means richer premiums.

The actual realised volatility of the underlying over a past period, calculated from price data. Used to judge whether IV looks cheap or expensive.

A sudden collapse in implied volatility - usually right after an event like earnings - that sharply deflates option premiums even if the price barely moves.

Where current IV sits between its 52-week low and high, on a 0-100 scale. High IV Rank favours selling premium; low favours buying.

The ratio of open interest (or volume) in puts versus calls. Often read as a sentiment gauge - high PCR can signal bearishness or oversold conditions.

The total number of outstanding option contracts not yet closed or exercised. Rising OI shows fresh positions; falling OI shows unwinding.

The gradual erosion of an option’s time value as expiry approaches. It accelerates in the final days and is measured by Theta.

The portion of an option’s premium that is already in the money - the difference between the strike and the spot price. It can never be negative.

The part of the premium above intrinsic value, reflecting the chance the option moves further into profit before expiry. Decays to zero at expiry.

A table listing all available strikes for an underlying, showing call and put data - premium, OI, volume and IV - side by side around the spot.

The NSE’s benchmark index of 50 large-cap Indian companies. Its options are the most heavily traded contracts in India.

The NSE index of major Indian banking stocks. Highly volatile, making its options popular with active intraday options traders.

The derivatives segment where contracts derive value from an underlying stock or index. Trading F&O requires margin and SEBI eligibility.

The capital your broker blocks to hold a position - especially when selling options or trading futures - as collateral against potential losses.

Buying (or selling) a call and a put at the same ATM strike and expiry. A long straddle profits from a big move in either direction.

Buying (or selling) an OTM call and an OTM put at the same expiry. Cheaper than a straddle but needs a larger move to profit.

A four-leg, range-bound strategy: sell an OTM call spread and an OTM put spread. Profits if the underlying stays inside the range until expiry.

Holding the underlying stock and selling a call against it to earn premium. Caps upside in exchange for income and a small cushion.

Selling a put while keeping enough cash to buy the stock if assigned. Used to earn premium or acquire a stock at a lower effective price.

Buying a lower-strike call and selling a higher-strike call of the same expiry. A defined-risk bullish bet that lowers cost but caps profit.

Buying a higher-strike put and selling a lower-strike put of the same expiry. A defined-risk bearish bet with limited cost and limited reward.

The day-by-day loss of option premium attributable to Theta. A core edge for option sellers and a constant headwind for buyers.

A description of an option’s strike relative to the spot price - ITM, ATM or OTM. It drives how much of the premium is intrinsic vs time value.

When an option seller is obligated to fulfil the contract - delivering or buying the underlying because the buyer exercised their right.

The act of an option holder invoking their right to buy (call) or sell (put) at the strike. Indian index options settle in cash at expiry.

Closing an open position by taking the opposite trade - selling what you bought, or buying back what you sold - to book profit or loss.

The daily revaluation of open positions at current market prices. Profits and losses are settled to your account each day.