Options & Swing Trading Term Deck

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Stock / Equity – A share representing partial ownership of a company that entitles the holder to a proportion of its profits and assets.

Swing Trading – A trading strategy that aims to capture price movements over several days to weeks by identifying short-term trends.

Day Trading – Buying and selling financial instruments within the same trading day to profit from intraday price movements.

Ticker Symbol – A unique abbreviation assigned to a publicly traded security for easy identification on exchanges.

Bid Price – The highest price a buyer is willing to pay for a security at a given moment.

Ask Price – The lowest price a seller is willing to accept for a security at a given moment.

Bid-Ask Spread – The difference between the bid and ask price, reflecting liquidity and transaction cost.

Volume – The total number of shares or contracts traded during a specific period, indicating activity levels.

Volatility – A measure of how much the price of a security fluctuates over time, influencing option premiums and risk.

Liquidity – How quickly and easily a security can be bought or sold without affecting its price significantly.

Market Order – An order to buy or sell immediately at the best available price, prioritizing execution over price.

Limit Order – An order to buy or sell a security at a specified price or better, prioritizing price over immediate execution.

Stop-Loss Order – An order placed to automatically sell a position when the price reaches a predefined level to limit losses.

Trailing Stop – A stop order that automatically adjusts with favorable price movement to lock in profits.

Position Sizing – Determining how many shares or contracts to trade based on account size and risk tolerance.

Risk-Reward Ratio – A comparison of the potential profit of a trade to the potential loss, used to evaluate attractiveness.

Option – A derivative contract granting the right but not obligation to buy or sell an underlying asset at a specified price before or at expiration.

Call Option – A contract giving the holder the right to buy the underlying asset at the strike price before expiration.

Put Option – A contract giving the holder the right to sell the underlying asset at the strike price before expiration.

Strike Price – The fixed price at which the holder of an option can buy or sell the underlying asset.

Expiration Date – The date on which an option contract becomes void and can no longer be exercised.

Premium – The price paid by the option buyer to the seller for the rights conveyed by the option contract.

In-the-Money (ITM) – An option whose strike price is favorable compared to the current underlying asset price, giving it intrinsic value.

Out-of-the-Money (OTM) – An option whose strike price is unfavorable compared to the current underlying price, holding no intrinsic value.

At-the-Money (ATM) – An option whose strike price is approximately equal to the current underlying asset price.

Exercise – The act of using an option’s right to buy or sell the underlying asset at the strike price.

Assignment – The obligation placed on the option seller to fulfill the terms when the buyer exercises the option.

American Option – An option that can be exercised any time before expiration.

European Option – An option that can be exercised only at expiration.

Covered Call – Selling a call option while simultaneously owning the underlying stock to generate income with limited upside.

Protective Put – Buying a put option to hedge a long stock position, limiting downside risk.

Collar – Holding a stock while buying a protective put and selling a covered call to limit both upside and downside.

Iron Condor – An options strategy combining a bear call spread and a bull put spread to profit from low volatility.

Vertical Spread – Buying and selling options of the same type and expiration but with different strike prices.

Horizontal Spread (Calendar Spread) – Buying and selling options with the same strike price but different expirations.

Diagonal Spread – Combining different strike prices and expirations to exploit time decay and directional moves.

Straddle – Buying or selling both a call and a put at the same strike price and expiration to profit from large moves.

Strangle – Buying or selling a call and a put at different strike prices but same expiration to capture volatility.

Butterfly Spread – A neutral options strategy combining multiple calls or puts to profit from low volatility near a strike price.

Condor Spread – Similar to a butterfly but with wider strike intervals, offering a larger profit zone.

Delta – An option Greek measuring how much the option price changes per one-point move in the underlying asset.

Gamma – Measures how much Delta changes as the underlying asset’s price changes, indicating convexity.

Theta – Measures the rate of time decay of an option’s price as expiration approaches.

Vega – Measures sensitivity of the option’s price to changes in the underlying asset’s implied volatility.

Rho – Measures the sensitivity of the option’s price to changes in interest rates.

Implied Volatility (IV) – The market’s forecast of a likely movement in the underlying asset’s price derived from option prices.

Historical Volatility (HV) – The actual past volatility of the underlying asset measured over a given time frame.

Open Interest – Total number of outstanding option contracts not yet closed or exercised.

Volume-to-Open-Interest Ratio – A metric comparing daily volume to existing open contracts to gauge liquidity.

Intrinsic Value – The amount by which an option is in the money, representing immediate exercise value.

Extrinsic Value (Time Value) – Portion of an option’s premium beyond intrinsic value, representing time and volatility.

Risk Reversal – A strategy involving selling a put and buying a call to express bullishness or hedge exposures.

Synthetic Long – Creating a long stock position using options (buy call + sell put at same strike).

Synthetic Short – Creating a short stock position using options (sell call + buy put at same strike).

Put-Call Parity – Mathematical relationship between prices of puts, calls, and the underlying asset ensuring no arbitrage.

IV Skew – Variation of implied volatility across strikes or expirations showing market sentiment on risk.

VIX Index – A measure of the market’s expectation of 30-day volatility derived from S&P 500 options.

Greeks Hedging – Adjusting a portfolio to neutralize sensitivities to Delta, Gamma, Vega, Theta, or Rho.

Covered Put – Selling a put while holding a short position in the underlying stock.

Naked Option – Writing an option without holding the underlying asset, exposing the trader to unlimited risk.

Margin Requirement – The minimum account equity needed to write uncovered options or hold leveraged positions.

Leverage – Using borrowed capital or derivatives to amplify exposure to price movements.

Hedging – Using options or other instruments to offset potential losses in an existing position.

Volatility Trading – Strategies designed to profit from changes in implied or realized volatility rather than direction.

Gamma Scalping – Adjusting a Delta-neutral portfolio to profit from volatility while maintaining hedge.

Theta Decay Harvesting – Strategies exploiting time decay, such as selling options to earn premium.

Ratio Spread – Buying a certain number of options and selling more options at another strike to create asymmetric exposure.

Box Spread – A complex options position combining spreads to create a synthetic loan or arbitrage.

Calendar Arbitrage – Exploiting price differences between options of the same strike but different expirations.

Pin Risk – The risk of uncertainty in assignment when the stock closes at or near an option’s strike at expiration.

Early Exercise – Exercising an American option before expiration to capture dividends or other benefits.

Dividend Risk – The risk that early exercise or price adjustments occur around dividend dates.

Assignment Risk – Uncertainty of being assigned on short options before expiration.

Swing Trading Setup – Identifying technical patterns, support/resistance, and momentum for multi-day trades.

Support Level – Price level where buying pressure historically prevents further decline.

Resistance Level – Price level where selling pressure historically prevents further advance.

Breakout – Price moving strongly beyond a support or resistance level, often triggering new trends.

Pullback – Temporary reversal within a larger trend providing potential entry points.

Moving Average (MA) – An average of past prices used to identify trend direction and support/resistance.

Exponential Moving Average (EMA) – A moving average giving more weight to recent prices to react faster to changes.

Relative Strength Index (RSI) – Momentum indicator measuring speed and change of price movements to identify overbought or oversold conditions.

MACD (Moving Average Convergence Divergence) – Trend-following momentum indicator showing the relationship between two moving averages.

Bollinger Bands – Volatility bands plotted around a moving average to signal potential overextension.

Fibonacci Retracement – Levels based on Fibonacci ratios used to identify potential support/resistance zones.

Volume Profile – Visualization of traded volume at different price levels to find areas of interest.

Risk Management Plan – A structured approach to limiting potential losses and managing position size.

Win Rate – The percentage of trades resulting in profit.

Expectancy – The average profit or loss per trade factoring in win rate and risk-reward ratio.

Kelly Criterion – A formula for determining optimal bet size to maximize long-term growth.

Backtesting – Testing a strategy on historical data to assess its viability.

Forward Testing (Paper Trading) – Testing a strategy in real-time with virtual money to confirm performance.

Sharpe Ratio – A measure of risk-adjusted return comparing excess return to volatility.

Sortino Ratio – A risk-adjusted return metric focusing on downside volatility only.

Correlation – Statistical measure of how two assets move relative to each other, useful in hedging or diversification.

Beta – Measure of a stock’s volatility relative to the overall market.