ThetifyGlossary
A
Annualized return
A return over N days scaled to a year: return ÷ capital ÷ (days ÷ 365).
What it means for a seller: It is only a comparison device — it assumes every cycle repeats like this one, which lesson 9 shows they do not.
Assignment
The event where the option holder exercises and the seller must buy (put) or deliver (call) the shares.
What it means for a seller: It is the obligation finally being called in — the reason the whole strike has to be covered, not just the premium.
At the money (ATM)
The strike closest to the current stock price.
What it means for a seller: It carries the most extrinsic value and the most gamma at once — the largest premium and the fastest-changing delta.
Taught in lesson 6: Picking the expiry: the 30–45 DTE window
B
Backtest
Running a rule over past data to see what it would have produced.
What it means for a seller: It never pays the bid-ask spread, never gets a bad fill and never panics — lesson 15 is about that gap.
Beta
How much a stock has moved for each 1% move in the index, measured over a past window.
What it means for a seller: It is the conversion rate that lets separate names be added up in one set of index terms.
Taught in lesson 14: Position size: surviving five losses in a row
Beta-weighted delta
Each position’s delta restated in index terms: delta × (stock price ÷ index price) × beta, then added up.
What it means for a seller: It answers the only question that matters in a bad month: how much of the account moves when everything falls together.
Taught in lesson 14: Position size: surviving five losses in a row
Bid-ask spread
The gap between the best price to sell at and the best price to buy at.
What it means for a seller: A wide one is paid twice — opening and closing — which quietly eats the premium the model says is there.
Taught in lesson 18: Liquidity: what the spread actually costs
Black-Scholes
The closed-form model that turns stock price, strike, time, rate and volatility into a theoretical option price.
What it means for a seller: Every theoretical price and Greek in the computed feedback comes from it, which is why each scenario prints its own assumptions.
Breakeven
The stock price at expiration where the position comes out flat: strike minus premium for a short put.
What it means for a seller: Between breakeven and the strike the position is still fine even though the option is in the money.
Buying power
The amount a broker still lets you commit after existing collateral requirements.
What it means for a seller: Lesson 14 sizes against the account, not against what the broker still allows, because those two diverge exactly when it matters.
Taught in lesson 14: Position size: surviving five losses in a row
C
Call option
A contract giving its holder the right to buy 100 shares at the strike until expiration.
What it means for a seller: Sold against shares you already own it becomes a covered call; sold without them the upside risk has no cap.
Taught in lesson 3: Covered calls: being called away is not a loss
Capital in use
The cash the position ties up: strike × 100 for a cash-secured put, max loss × 100 for a defined-risk spread.
What it means for a seller: Every return figure in this app divides by it, so an honest denominator is what keeps the percentages honest.
Cash-secured put
A short put backed by enough cash set aside to buy the shares at the strike if assigned.
What it means for a seller: Capital in use is strike × 100 per contract — not the stock value and not the premium, which is the point of lesson 2.
Cash-settled
An option that settles by paying the in-the-money amount in cash instead of delivering shares.
What it means for a seller: There is nothing to be assigned and nothing to hold through a drawdown, so the wheel’s “take the shares and wait” path does not exist.
Contract
One standard option covering 100 shares of the underlying.
What it means for a seller: Every per-share figure in this app becomes a per-contract figure by multiplying by 100.
Correlation
How closely two instruments move together, from −1 through 0 to 1.
What it means for a seller: In calm months names look independent; in the month that matters correlation goes to one and ten names behave like one.
Taught in lesson 14: Position size: surviving five losses in a row
Cost basis
What the shares effectively cost you once the premium is counted: strike minus premium.
What it means for a seller: It is the number to compare with the stock price after assignment, not the strike on its own.
Covered call
A short call written against 100 shares you already own.
What it means for a seller: It lowers the cost of the shares and caps how far up you still participate; it is not downside protection.
Taught in lesson 3: Covered calls: being called away is not a loss
CVaR 5%
The average result across the worst 5% of modelled outcomes, not the boundary of that 5%.
What it means for a seller: It answers “when it goes wrong, how wrong” — the question a probability of profit cannot answer.
D
Delta
How much an option’s theoretical price moves when the stock moves $1, between 0 and 1 in absolute value.
What it means for a seller: For a short put the absolute delta is a rough stand-in for the chance of finishing in the money — that is how lesson 5 picks a strike.
Taught in lesson 5: Picking the strike: delta is (roughly) probability
Diagonal spread
A long option and a short option of the same type, with different strikes and different expirations.
What it means for a seller: A PMCC is one; what it ties up is the net debit, and that whole amount is at risk if the stock sits below the long strike when the long call expires.
Dividend
Cash paid per share to whoever holds the shares on the record date.
What it means for a seller: It is why the exercise risk on a short call is a calendar question and not only a price question.
Drawdown
The fall from a peak to the following trough, usually stated as a percentage.
What it means for a seller: It is the figure that decides whether a plan survives long enough for its average to matter.
DTE (days to expiration)
The number of calendar days left until the contract expires.
What it means for a seller: Lesson 6 opens at 30–45 DTE and treats 21 DTE as a decision point, because decay and gamma both change shape there.
Taught in lesson 6: Picking the expiry: the 30–45 DTE window
E
Early assignment
Assignment before expiration, which American-style options allow at any time.
What it means for a seller: It concentrates in two spots: deep in the money with little extrinsic value left, and the day before a dividend goes ex.
Earnings
A scheduled company report that resolves a known unknown on a known date.
What it means for a seller: Implied volatility is high before it for a reason; lesson 8 treats holding one inside the position as its own decision.
European-style
An option that can be exercised only at expiration, not before.
What it means for a seller: It removes early assignment, but most broad-index options that are European are also cash-settled — lesson 17 checks both before a strike is chosen.
Ex-dividend date
The first day a buyer of the shares no longer receives the coming dividend.
What it means for a seller: A short call in the money is most likely to be exercised the day before it, because the dividend is worth more than the extrinsic value left.
Exercise
The holder using the right the contract gives, turning the option into shares at the strike.
What it means for a seller: The seller never chooses it; the seller only ever chooses whether to still be there when it happens.
Exercise by exception
The OCC procedure that exercises an expiring option at least $0.01 in the money automatically, unless its holder instructs otherwise.
What it means for a seller: For a seller it means assignment waits for nobody to decide: one cent in the money at the close is enough.
Expected value (EV)
The average outcome per share if this same trade were repeated across the whole modelled distribution.
What it means for a seller: It is only as honest as the distribution behind it, which is the entire subject of lesson 9.
Expiration
The date the contract ends; after it the option has either been exercised or is worth nothing.
What it means for a seller: Everything a seller is paid for is measured against this date, which is why the calendar matters as much as the strike.
Taught in lesson 6: Picking the expiry: the 30–45 DTE window
Extrinsic value
The part of the price above intrinsic value — what is paid for the time and the volatility that remain.
What it means for a seller: It is the only part that can melt to zero in the seller’s favour, so it is what the profit rule in lesson 10 measures.
F
Fat tails
Extreme moves that show up far more often in real price history than a normal-shaped model says they should.
What it means for a seller: A short put is paid a small premium for exactly those moves, so the tail is where its real cost lives.
FOMC
The scheduled US rate-setting meeting whose outcome moves the whole market at once.
What it means for a seller: Unlike earnings it hits every name in the account on the same afternoon, so it is a sizing question, not a single-name question.
G
Gamma
How fast delta itself changes as the stock moves; it peaks at the money and close to expiration.
What it means for a seller: High gamma is why the last three weeks feel different — a small move rewrites the delta, which is why lesson 6 makes 21 DTE a decision point.
Taught in lesson 6: Picking the expiry: the 30–45 DTE window
Gamma risk
The risk that comes from delta changing quickly, which grows sharply in the final weeks.
What it means for a seller: It is why a position that was comfortable at 45 DTE can need a decision at 21 DTE without the stock doing anything unusual.
H
Historical volatility (HV)
How much the stock actually moved over a past window, stated in annualised terms.
What it means for a seller: Putting it next to implied volatility is the cheapest test of whether an option is dear relative to how this stock behaves.
I
Implied volatility (IV)
The volatility figure that makes the model price equal the price the option actually trades at.
What it means for a seller: It is what the premium hangs on: the same strike over the same days pays more when implied volatility is higher.
In the money (ITM)
A put is in the money when the stock is below the strike; a call when the stock is above it.
What it means for a seller: A short option in the money is where assignment comes from, and where intrinsic value replaces decay.
Intrinsic value
The part of the price that would survive if expiration were today: strike minus stock for a put, floored at zero.
What it means for a seller: It never decays, so a short option deep in the money has stopped being a decay trade.
Iron condor
A put spread and a call spread on the same underlying and expiration, both sold.
What it means for a seller: It collects from both sides while the stock stays in the middle, and the capital is the wider of the two wings.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
IV crush
The collapse in implied volatility right after a scheduled event resolves the uncertainty it was pricing.
What it means for a seller: It cuts both ways: the short option gets cheaper to buy back, but the stock may have gapped through the strike first.
IV percentile
The share of days in the past year on which implied volatility was lower than it is today.
What it means for a seller: One spike distorts it less than it distorts IV rank, so the two are read side by side.
IV rank
Where today’s implied volatility sits between the lowest and the highest reading of the past year, as a percentage.
What it means for a seller: A high reading says the same strike pays more than it usually does; it says nothing about which way the stock goes.
L
Liquidity
How easily a contract can be traded without moving its price much.
What it means for a seller: Rolling and defending both assume the option can be bought back; thin contracts break that assumption first.
Taught in lesson 18: Liquidity: what the spread actually costs
Lognormal
The textbook distribution of stock prices that Black-Scholes assumes.
What it means for a seller: It under-counts the deep drops, so an EV computed on it flatters a short put.
Long put
The buyer’s side of a put contract: the right, not the obligation, to sell 100 shares at the strike.
What it means for a seller: As the far leg of a spread it is the piece that puts a floor under the loss.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
M
Margin
Collateral a broker requires instead of the full cash amount, often a fraction of the strike.
What it means for a seller: The obligation does not shrink with the collateral: lesson 2 quotes every return on the full strike × 100.
Max loss
The worst outcome the position can produce under the contract terms, before fees.
What it means for a seller: A naked short put has a very large one; a spread replaces it with width minus net credit.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
N
Naked put
A short put with no long put underneath it to cap the loss.
What it means for a seller: It keeps the whole premium and the whole tail; lesson 16 prices what giving up part of the premium buys.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
Net credit
Cash that arrives when a multi-leg order is opened: premium taken in minus premium paid out.
What it means for a seller: On a spread it is also the cap on what the position can make, and the breakeven is measured from it.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
Net debit
Cash that leaves the account when an order is opened: premium paid out exceeds premium taken in.
What it means for a seller: A roll that costs a debit is buying something — usually a lower strike — and lesson 11 asks what it bought.
Notional exposure
The full share-equivalent value a position controls: strike × 100 × contracts.
What it means for a seller: Four small premiums can add up to a notional larger than the account, which is the trap lesson 14 is built around.
Taught in lesson 14: Position size: surviving five losses in a row
O
Open interest
How many contracts of one strike and expiration are currently outstanding.
What it means for a seller: Together with the bid-ask spread it is a rough read on whether the position can be closed at a sane price.
Taught in lesson 18: Liquidity: what the spread actually costs
Optimism gap
The lognormal EV minus the fat-tail EV computed on real price history, under the same assumptions.
What it means for a seller: It puts a dollar figure on how much the textbook model is flattering this particular trade.
Out of the money (OTM)
A put is out of the money when the stock is above the strike; a call when the stock is below it.
What it means for a seller: Selling out of the money is what buys the cushion between the stock today and the price you would pay for shares.
Taught in lesson 5: Picking the strike: delta is (roughly) probability
P
Paper trading
Practising the mechanics with simulated orders instead of real money.
What it means for a seller: It rehearses the arithmetic well and the feeling of a drawdown not at all.
Pin risk
The uncertainty when the stock closes right at a short strike on expiration day: some holders exercise and some do not.
What it means for a seller: You may or may not own 100 shares on Monday and only find out overnight; closing before the bell removes it, which is why lesson 17 calls it the one risk you can delete outright.
PMCC (a LEAPS as the stock)
A covered call written against a deep in-the-money, long-dated call — a LEAPS — instead of 100 shares.
What it means for a seller: It ties up a fraction of the capital, but the long leg pays no dividend, decays, and moves less than the shares — lesson 21 prices those three gaps.
Position sizing
Deciding how many contracts to carry, given the account and the worst case each one can produce.
What it means for a seller: Lesson 14 sizes so that five losing trades in a row still leave an account that can keep going.
Taught in lesson 14: Position size: surviving five losses in a row
Probability ITM at expiry
The modelled chance the option is in the money at the moment it expires.
What it means for a seller: It runs close to the absolute delta, and it is the number that decides whether shares actually arrive.
Taught in lesson 5: Picking the strike: delta is (roughly) probability
Probability of profit (POP)
The modelled chance the position is above water at expiration, under the scenario’s own assumptions.
What it means for a seller: A short put clears it as long as the stock stays above breakeven, which is why the number looks high even on trades with an ugly tail.
Taught in lesson 5: Picking the strike: delta is (roughly) probability
Probability of touch
The modelled chance the stock reaches the strike at some point before expiration, not only at the end.
What it means for a seller: It runs near twice the in-the-money probability, so a position that looks calm on paper is tested far more often than that.
Taught in lesson 5: Picking the strike: delta is (roughly) probability
Put option
A contract giving its holder the right to sell 100 shares at the strike until expiration.
What it means for a seller: The seller is on the other side of that right, which is the position this whole course is about.
Q
Qualified covered call
A covered call whose strike and time to expiration fall inside the tax code’s limits, so the shares underneath keep their holding period.
What it means for a seller: An unqualified call can stop the holding-period clock on the shares, so the call leg and the share leg are not two independent decisions.
Taught in lesson 19: Tax concepts a seller keeps running into
R
Return on capital
Premium taken in divided by the capital the position ties up.
What it means for a seller: It is the honest way to compare two trades whose premiums look similar but whose capital does not.
Rho
How much an option’s price changes when the risk-free rate moves one percentage point.
What it means for a seller: On 30–45 day options it is the smallest of the Greeks; it is listed so it is not mistaken for something missing.
Risk-free rate
The short-term rate the pricing model discounts with, entered as an assumption in every scenario here.
What it means for a seller: Cash held against a cash-secured put sits in that rate, which is part of why the capital figure matters.
Roll
Closing the option you are short and opening another one in the same move, usually further out in time.
What it means for a seller: One roll moves four numbers at once: net credit, breakeven, annualised yield and capital in use.
Roll down
Rolling a short put to a lower strike, usually together with a later expiration.
What it means for a seller: It lowers the price you would own shares at, and it often turns the roll into a net debit.
Roll out
Rolling to a later expiration while keeping the same strike.
What it means for a seller: It usually takes in more credit and buys time, at the cost of carrying the same obligation for longer.
S
Section 1256 contract
A US tax category that includes broad-based index options: marked to market at year end and split 60% long-term / 40% short-term.
What it means for a seller: Two positions with nearly the same payoff can fall under different rulebooks, so the settlement question comes before the strike; confirm with a qualified professional.
Taught in lesson 19: Tax concepts a seller keeps running into
Short put
The seller’s side of a put contract: an obligation to buy 100 shares at the strike if exercised.
What it means for a seller: Max profit is the premium and it is capped; max loss is large — that asymmetry is the subject of the whole course.
Short strangle
An out-of-the-money put and an out-of-the-money call on the same stock and expiration, both sold.
What it means for a seller: Two credits come in, but there are two strikes to defend and no defined maximum loss — lesson 22 is about that trade-off.
Taught in lesson 22: Short straddles and strangles: selling both sides
Slippage
The difference between the price a plan assumed and the price actually filled.
What it means for a seller: It is charged on every leg of every roll, which is why a rule that rolls often needs a wider edge.
Spread width
The distance between the two strikes of a vertical spread.
What it means for a seller: Width minus net credit is both the max loss and the capital, so it is the single dial that sets the size of the trade.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
Standard deviation
A measure of how spread out a set of returns is around its own average.
What it means for a seller: Quoting a move in sigmas only means something once you say which distribution the sigma came from.
Straddle
A put and a call at the same at-the-money strike and expiration; selling both is a short straddle.
What it means for a seller: It takes in the most premium of the two-sided trades and is tested by almost any move, since both strikes start at the money.
Taught in lesson 22: Short straddles and strangles: selling both sides
Strike
The price at which the contract can be exercised — where the shares would change hands.
What it means for a seller: Picking it is the seller’s main decision: it sets the delta, the premium, and the price you would end up owning shares at.
T
Taking profit
Buying the short option back before expiration once most of the premium has already been captured.
What it means for a seller: Lesson 10 measures it as premium captured, because the last slice of extrinsic value takes the most days and carries the most gamma.
Tested strike
The stock has moved to or through the strike, so the short option now carries real assignment risk.
What it means for a seller: Lesson 12 uses an absolute delta of 0.30 as the line where the four defensive options start to differ in cost.
The wheel
Selling cash-secured puts until assigned, then selling covered calls on the shares until they are called away.
What it means for a seller: Assignment is a step in the loop rather than a failure, provided the strike was a price you were willing to own at.
Taught in lesson 4: The wheel: put, assignment, call, repeat
Theta
The value an option loses from one more day passing, everything else held still.
What it means for a seller: It is the whole income side of a short option: the seller is paid for carrying the obligation while the buyer’s asset melts.
Taught in lesson 6: Picking the expiry: the 30–45 DTE window
Time value
Another name for extrinsic value: what is left of the price once intrinsic value is taken out.
What it means for a seller: Watching it melt on the lesson 1 chart is the whole mechanism a seller is paid for.
U
Underlying
The stock or fund the option contract is written on.
What it means for a seller: Lesson 4 asks a question about it before any Greek matters: would owning it at that strike be acceptable?
V
Vega
How much an option’s price changes when implied volatility moves one percentage point.
What it means for a seller: A short option is short vega: a jump in implied volatility makes the position worse before the stock has moved at all.
Vertical spread
Two options of the same type and expiration at different strikes, one sold and one bought.
What it means for a seller: The long leg spends part of the premium to put a floor under the loss, which is what lesson 16 measures.
Taught in lesson 16: Turn a naked put into a spread: verticals and the iron condor
Volatility drag
What a daily-reset leveraged fund loses on a choppy path compared with a straight multiple of the index’s move.
What it means for a seller: Measured against three times the index’s log return, it only ever runs one way: over the same stretch, the fund has a harder path back to where it started than a stock does — lesson 20 measures it.
Taught in lesson 20: A wheel on a 3× fund is a different trade
Volatility skew
The pattern where implied volatility differs strike by strike, usually higher for downside puts.
What it means for a seller: It is why an out-of-the-money put pays more than a symmetric model says it should.
W
Wash sale
Closing a position at a loss and acquiring something substantially identical within 30 days before or after the sale.
What it means for a seller: The loss is deferred into the replacement’s cost basis rather than lost; lesson 19 describes the mechanics only — confirm the rules where you live with a qualified professional.
Taught in lesson 19: Tax concepts a seller keeps running into
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