Glossary · 129 terms
Derivatives & Options
All derivatives & options terms in the EquitiesAmerica.com glossary — plain-English definitions for American investors.
Asian Option(average price option)
An Asian option is an exotic derivative whose payoff depends on the average price of the underlying asset over a specified observation period rather than the spot price at expiration, reducing susceptibility to price manipulation at expiry and lowering cost compared to vanilla options with the same strike and maturity.
Assignment(options assignment)
Assignment is the process by which the seller (writer) of an options contract is obligated to fulfill the terms of the contract — either delivering 100 shares (call assignment) or purchasing 100 shares (put assignment) — when the buyer exercises their option.
At the Money(ATM)
An option is 'at the money' (ATM) when the strike price is equal to or very close to the current market price of the underlying stock, resulting in minimal or zero intrinsic value.
Backwardation(inverted market)
Backwardation is a futures market condition where the futures price is below the expected future spot price, resulting in a downward-sloping forward curve where near-dated contracts trade at a premium to longer-dated ones.
Barrier Option(knock-in option)
A barrier option is an exotic option that is activated or cancelled depending on whether the underlying asset's price crosses a specified barrier level during the life of the contract, making its payoff path-dependent rather than solely determined by the price at expiration.
Basis (Futures)(cash-futures basis)
In futures markets, basis is the difference between the spot (cash) price of an asset and the price of a corresponding futures contract, representing the cost of carry and any supply-demand imbalances between immediate and forward delivery.
Bear Put Spread(put debit spread)
A bear put spread is a bearish options strategy that involves buying a put at a higher strike price and selling a put at a lower strike price with the same expiration, creating a net debit position that profits when the underlying stock declines moderately.
Bermuda Option(Bermudan option)
A Bermuda option is an options contract that can be exercised on a predetermined set of specific dates before expiration rather than only at expiration (European style) or at any time (American style), sitting between these two extremes in the spectrum of exercise flexibility.
Binary Option(digital option)
A binary option is a contract that pays a fixed, predetermined amount if a specified condition is met at expiration — such as a stock closing above a certain price — and pays nothing if the condition is not met.
Box Spread(Box Arbitrage)
A Box Spread is a four-leg options arbitrage strategy that combines a bull call spread with a bear put spread at the same strikes and expiration, creating a position whose value at expiration is always equal to the difference between the two strike prices, effectively replicating a risk-free loan.
Broken Wing Butterfly(BWB)
A Broken Wing Butterfly is a modified butterfly spread in which the wings are unequal in width, creating an asymmetric risk-reward profile and often allowing the position to be entered for a net credit rather than a debit.
Bull Call Spread(call debit spread)
A bull call spread is a bullish options strategy that involves buying a call at a lower strike price and selling a call at a higher strike price with the same expiration, creating a net debit position that profits when the underlying stock rises moderately.
Butterfly Spread(long butterfly)
A butterfly spread is a three-strike, limited-risk options strategy that profits when the underlying stock stays near a central strike price at expiration, combining a bull spread and a bear spread with a shared middle strike.
Calendar Spread(time spread)
A calendar spread is an options strategy that involves selling a near-term option and buying a longer-term option at the same strike price, profiting primarily from the faster time decay of the short-dated contract.
Call Option(call)
A call option is a financial contract that grants the buyer the right, but not the obligation, to purchase 100 shares of an underlying stock at a specified strike price on or before the expiration date.
Cash-Secured Put(CSP)
A cash-secured put is an options strategy in which an investor sells a put option while holding enough cash in their account to cover the full cost of purchasing 100 shares at the strike price if the put is assigned.
CBOE Skew Index(Black Swan Index)
The CBOE Skew Index, often called the Black Swan Index, is a measure of the perceived tail risk in the S&P 500 derived from options market pricing, specifically capturing how much extra premium the market historically paid for out-of-the-money put options relative to at-the-money options as an indication of left-tail crash risk concerns.
Charm (Options Greek)(delta decay)
Charm, also called delta decay or DdeltaDtime, is a second-order options Greek that measures the rate at which an option's delta changes with the passage of time, showing how much delta will shift from one trading day to the next.
Chooser Option(as-you-like-it option)
A chooser option is an exotic derivative that grants the holder the right to designate, at a specified choice date before expiration, whether the contract will function as a call option or a put option for the remainder of its life, providing flexibility to benefit from either direction of the underlying move.
Christmas Tree Spread(Ladder Spread)
A Christmas Tree Spread is an advanced options strategy built with three different strike prices where one option is bought, two are sold at a middle strike, and one is bought at a further out-of-the-money strike, forming a payoff diagram that resembles a Christmas tree shape.
Cliquet Option(ratchet option)
A cliquet option, also called a ratchet option, is an exotic derivative consisting of a series of forward-starting options that automatically reset their strike price to the prevailing underlying price at each predetermined reset date, locking in interim gains and resetting exposure at current market levels.
Collar Strategy(protective collar)
A collar strategy is an options position established by owning shares of stock, selling an out-of-the-money call, and buying an out-of-the-money put, creating a protective range that caps both the upside gain and downside loss.
Commodity Futures(commodity contracts)
Commodity futures are standardized contracts traded on regulated exchanges that obligate the buyer and seller to transact a specific quantity of a physical commodity — such as crude oil, gold, corn, or natural gas — at a predetermined price and date.
Compound Option(option on an option)
A compound option is an exotic derivative that gives the holder the right, but not the obligation, to buy or sell another option on a specified date at a predetermined premium, creating options on options that offer leveraged exposure to volatility changes and reduced upfront cost.
Contango(normal contango)
Contango is a futures market condition where the futures price of an asset is higher than the expected future spot price, resulting in an upward-sloping forward curve where longer-dated contracts trade at a premium to near-dated ones.
Contract for Difference (CFD)(CFD)
A contract for difference (CFD) is a leveraged OTC derivative that allows a trader to speculate on price movements in an underlying asset — such as a stock, index, commodity, or currency — by settling the difference between the opening and closing price in cash, without ownership of the underlying asset.
Conversion (Options Arbitrage)(Conversion Arbitrage)
A Conversion is a three-leg options arbitrage strategy in which a trader who owns stock sells a call and buys a put at the same strike and expiration, creating a synthetic short position that offsets the long stock and locks in a risk-free profit when mispricing exists.
Correlation Swap(Realised Correlation Swap)
A Correlation Swap is an over-the-counter derivatives contract in which two counterparties exchange a fixed correlation strike against the subsequent realized pairwise correlation between a specified basket of assets, allowing direct trading of correlation as an asset class.
Covered Call(buy-write)
A covered call is an options strategy in which an investor who already owns 100 shares of a stock sells one call option against those shares to collect premium income while accepting a cap on upside gains.
Credit Default Swap(CDS)
A credit default swap (CDS) is a bilateral OTC derivatives contract in which the protection buyer pays periodic premiums to the protection seller in exchange for a payment contingent on a defined credit event — such as a default or bankruptcy — affecting a specified reference entity.
Credit Spread(net credit spread)
A credit spread is an options strategy where the trader sells a higher-premium option and buys a lower-premium option simultaneously, collecting a net premium upfront in exchange for capped profit and defined maximum loss.
Currency Futures(FX futures)
Currency futures are standardized exchange-traded contracts that specify the price at which one currency will be exchanged for another on a future delivery date, traded primarily on the CME Group and used for hedging foreign exchange risk and speculating on exchange rate movements.
Debit Spread(net debit spread)
A debit spread is an options strategy where the trader pays a net premium to enter the position by buying a higher-priced option and selling a lower-priced option, resulting in a defined-risk directional bet at a lower cost than buying a single option outright.
Delta(options delta)
Delta is an options Greek that measures how much an option's price is expected to change for every $1 move in the underlying stock's price, ranging from 0 to 1 for calls and -1 to 0 for puts.
Diagonal Spread(diagonal call spread)
A diagonal spread is an options strategy that combines a longer-dated long option with a shorter-dated short option at a different strike price, creating a position that benefits from both time decay on the short leg and directional movement in the underlying.
Dispersion Trade (Detailed)(Dispersion Trading)
A Dispersion Trade is a sophisticated volatility strategy that sells options on a stock index while simultaneously buying options on the individual constituents of that index, profiting when individual stocks move more than the index as a whole — a condition known as high dispersion or low correlation.
Dividend Arbitrage(Dividend Capture (Options))
Dividend Arbitrage is an options strategy that seeks to profit from an upcoming dividend payment by purchasing in-the-money puts and the corresponding shares simultaneously, capturing the dividend while using the put to hedge downside risk and recover the stock's post-dividend price drop.
Dividend Swap(dividend derivative)
A dividend swap is an OTC derivative in which one party pays a fixed amount representing expected future dividends and receives the actual realized dividends paid by an index or single stock over the contract period, isolating dividend risk as a tradeable exposure.
Double Calendar(Double Calendar Spread)
A Double Calendar is a neutral options strategy that uses two calendar spreads — one with calls and one with puts at different strikes — to create a wider profit tent than a single calendar, profiting from time decay and a decline in implied volatility while the underlying remains range-bound.
Double Diagonal(Double Diag)
A Double Diagonal is a neutral, time-decay-harvesting options strategy that combines two diagonal spreads — one with calls and one with puts — at different strikes and expirations, profiting from the faster decay of the short near-term options versus the slower decay of the long far-term options.
E-mini S&P 500 Futures(ES futures)
The E-mini S&P 500 futures contract (ticker: ES) is an electronically traded futures contract on the S&P 500 index listed on the CME, with a contract value of 50 times the index level, making it one of the most liquid futures instruments in the world.
Early Exercise(early assignment)
Early exercise refers to the act of exercising an American-style options contract before its expiration date, which is a feature unique to American-style options and is most economically justified for in-the-money call options before an ex-dividend date or deeply in-the-money put options with significant interest rate benefits.
Equity Swap(equity total return swap)
An equity swap is an OTC derivative agreement in which two counterparties exchange the return on an equity asset — typically a stock, basket, or index — for a periodic cash flow based on a floating or fixed interest rate, allowing synthetic equity exposure without direct ownership of the underlying shares.
Exercise(option exercise)
Exercise is the act by which the holder of an options contract invokes their right to buy (in the case of a call) or sell (in the case of a put) the underlying asset at the strike price, converting the option into a stock position.
Exotic Option(non-vanilla option)
An exotic option is any options contract whose payout structure, exercise rules, or underlying reference differs from the standardized terms of plain-vanilla calls and puts traded on regulated exchanges such as the CBOE.
Expiration Date(expiry)
The expiration date is the last trading day on which an options contract can be exercised or sold, after which the contract becomes void and worthless if not in the money.
Expiration Friday(options expiration day)
Expiration Friday is the third Friday of each month on which standard monthly equity and index options contracts expire, marking the deadline by which holders must exercise in-the-money options or allow out-of-the-money options to expire worthless, and generating distinctive patterns of trading activity in the underlying stocks driven by options market dynamics.
Fence (Options)(Collar)
A Fence is an options hedging strategy in which a stock owner buys a protective put and sells an out-of-the-money call, bounding the portfolio outcome between a floor and a ceiling — protecting against downside while capping upside participation.
Freight Derivative(FFA)
A freight derivative is a financial contract whose value is tied to the future cost of shipping commodities by sea or other transport modes, allowing shipping companies, commodity traders, and cargo owners to hedge or speculate on freight rate fluctuations without chartering an actual vessel.
Front Ratio Spread(Ratio Spread)
A Front Ratio Spread is an options strategy in which more options are sold than bought at different strikes, creating a net short vega, theta-positive position that profits from a small directional move toward the short strikes, with the risk of large losses if the underlying moves far beyond them.
Futures Contract(futures)
A futures contract is a standardized, legally binding agreement to buy or sell a specific asset at a predetermined price on a specified future date, traded on regulated exchanges such as the CME Group and cleared through a central counterparty.
Futures vs Options(futures and options comparison)
Futures and options are both derivatives contracts, but futures obligate both parties to transact at the contract price while options grant the buyer a right without obligation, creating fundamentally different risk profiles, margin requirements, and use cases.
Gamma(options gamma)
Gamma measures the rate of change of an option's delta for every $1 move in the underlying stock price — essentially the acceleration of the option's price sensitivity.
Gamma Squeeze(gamma explosion)
A gamma squeeze is a rapid, self-reinforcing stock price increase triggered by options market makers forced to buy increasing amounts of the underlying shares to maintain delta-neutral hedges as call options move into the money and dealer gamma exposure grows.
Historical Volatility(HV)
Historical volatility (HV) is the annualized standard deviation of a stock's daily price returns over a defined lookback period, measuring how much the stock has actually moved in the past.
Implied Volatility(IV)
Implied volatility (IV) is the market's forward-looking estimate of how much an underlying stock's price will fluctuate over the life of an options contract, derived by reverse-engineering the options pricing model from the current market premium.
In the Money(ITM)
An option is 'in the money' (ITM) when it has positive intrinsic value — meaning a call option's strike price is below the current stock price, or a put option's strike price is above the current stock price.
Interest Rate Futures(Treasury futures)
Interest rate futures are exchange-traded contracts whose value is derived from a debt instrument or benchmark interest rate, allowing banks, asset managers, and other market participants to hedge or gain leveraged exposure to changes in short-term and long-term U.S. interest rates.
Intrinsic Value (Options)(exercise value)
Intrinsic value in options is the portion of an option's premium that represents its immediate exercise value — the profit that would be realized if the option were exercised right now.
Iron Condor(condor spread)
An iron condor is a four-leg options strategy that combines a bull put spread and a bear call spread on the same underlying stock or index, profiting when the price stays within a defined range until expiration.
IV Percentile(IVP)
IV Percentile measures the percentage of trading days over a given lookback period on which the implied volatility of an underlying was lower than its current level, providing a statistical context for how elevated or suppressed current IV is relative to its own history.
IV Rank(IVR)
IV Rank (Implied Volatility Rank) is a metric that expresses the current implied volatility of an underlying as a percentile rank relative to its own historical range over a defined lookback period, commonly 52 weeks.
Jade Lizard(short put plus call spread)
A Jade Lizard is a bullish options strategy that combines a short put with a short call spread, constructed so that the total premium collected exceeds the width of the call spread, eliminating upside risk entirely.
LEAPS(long-term options)
LEAPS (Long-Term Equity AnticiPation Securities) are options contracts with expiration dates more than one year away — typically one to three years — available on many large-cap U.S. stocks and major indexes.
Lookback Option(perfect timing option)
A lookback option is an exotic derivative whose payoff is based on the maximum or minimum price achieved by the underlying asset over the option's life, allowing the holder to effectively buy at the lowest price or sell at the highest price observed during the contract period in hindsight.
Margin (Futures)(initial margin)
In futures trading, margin is the good-faith deposit required to open and maintain a position, functioning as a performance bond rather than a down payment, with the CME Clearing House setting initial and maintenance margin levels for each contract.
Mark to Market(MTM)
Mark to market (MTM) is the daily settlement process in futures markets where open positions are revalued at the day's closing settlement price and gains or losses are immediately credited or debited to the trader's account.
Max Pain(options pain)
Max pain is the strike price at which the aggregate dollar value of all open options contracts (both calls and puts) would expire worthless, representing the price point that would cause the greatest loss to the largest number of options holders at expiration.
Max Pain Theory(maximum pain theory)
Max pain theory proposes that stock prices tend to gravitate toward the strike price at which the aggregate dollar value of expiring options — both calls and puts combined — is maximized in losses for all options holders, with the reasoning that options market makers and other large sellers of options benefit when the maximum number of contracts expire worthless.
Micro E-mini Futures(MES futures)
Micro E-mini futures are CME-listed contracts that are one-tenth the size of their standard E-mini counterparts, introduced in 2019 to provide retail traders with affordable access to futures markets on the S&P 500, Nasdaq-100, Russell 2000, and Dow Jones Industrial Average.
Mini Options(mini contracts)
Mini options are exchange-listed contracts that cover 10 shares of an underlying security rather than the standard 100 shares, allowing smaller accounts to trade options on high-priced stocks such as Amazon, Google, and Apple without committing full-sized notional exposure.
Monthly vs Weekly Options(Weeklys)
Monthly options are standardized contracts expiring on the third Friday of each calendar month, while weekly options (Weeklys) expire every Friday and were introduced by the CBOE in 2005 to give traders more precise control over short-term expirations.
Naked Option(uncovered option)
A naked option is a short options position — either a call or put — where the seller does not hold any offsetting position in the underlying stock or another option to hedge the risk, leaving them exposed to potentially unlimited or very large losses.
Open Interest(OI)
Open interest is the total number of outstanding (open) options contracts that have been created but not yet closed, exercised, or expired, serving as a measure of market participation and liquidity.
Option on Futures(futures option)
An option on futures is a standardized exchange-listed derivative that grants the holder the right, but not the obligation, to buy or sell an underlying futures contract at a specified strike price by a set expiration date, combining the leverage of futures with the limited-risk structure of options.
Options Chain(option board)
An options chain is a real-time table listing all available call and put option contracts for a particular stock or index, organized by expiration date and strike price, showing bid/ask prices, volume, open interest, and Greek values.
Options Clearing Corporation(OCC)
The Options Clearing Corporation (OCC) is the central counterparty clearinghouse for all U.S. listed equity options and futures options, guaranteeing the financial obligations of every options contract traded on U.S. exchanges including the CBOE, NYSE American Options, and Nasdaq PHLX.
Options Expiration Cycle(expiration cycle)
The options expiration cycle refers to the structured schedule of expiration dates assigned to listed equity options, originally designed to spread contract maturities across three quarterly cycles so that every optionable stock has contracts expiring in at least four distinct months.
Out of the Money(OTM)
An option is 'out of the money' (OTM) when it has no intrinsic value — a call whose strike price exceeds the current stock price, or a put whose strike price is below the current stock price.
Pin Risk(pinning risk)
Pin risk is the uncertainty faced by traders who are short options contracts when the underlying stock closes exactly at — or very near — the strike price at expiration, creating ambiguity about whether the option will be exercised and resulting in an unexpected stock position.
Pinning (Options)(options pin)
Options pinning is the tendency for an underlying stock's price to gravitate toward a heavily traded strike price as options expiration approaches, driven by the delta-hedging activity of options market makers who must buy shares when the stock rises above the strike and sell shares when it falls below, creating a self-stabilizing gravitational pull toward that price level.
Poor Man's Covered Call(PMCC)
A Poor Man's Covered Call (PMCC) is an options strategy that replicates a traditional covered call by substituting stock ownership with a deep in-the-money long-dated call option, dramatically reducing the capital required to enter the trade.
Power Option(polynomial option)
A power option is an exotic derivative whose payoff is determined by the underlying asset price raised to a specified power (exponent) rather than a simple linear difference from the strike price, making the payoff nonlinearly convex and allowing traders to obtain highly leveraged exposure to price movements.
Premium(option price)
The options premium is the price paid by the buyer to the seller (writer) of an option contract, representing the total market value of one contract covering 100 shares of the underlying stock.
Protective Put(married put)
A protective put is a hedging strategy in which an investor who owns 100 shares of stock buys one put option on those shares to limit downside losses while preserving unlimited upside potential.
Put Option(put)
A put option is a contract that gives the buyer the right, but not the obligation, to sell 100 shares of an underlying stock at a specified strike price on or before the expiration date.
Quanto Option(guaranteed exchange rate option)
A quanto option is an exotic cross-currency derivative whose payoff is denominated in a currency different from the currency in which the underlying asset is priced, with the exchange rate fixed at inception so that currency risk is eliminated while the holder retains full exposure to the foreign asset's price movement.
Quarterly Options(end-of-quarter options)
Quarterly options are contracts that expire at the end of each calendar quarter — March, June, September, and December — and are most commonly used on broad index products at the CBOE to align with institutional portfolio rebalancing and hedging schedules.
Rainbow Option(multi-asset option)
A rainbow option is an exotic multi-asset derivative whose payoff depends on the performance of two or more underlying assets, typically referencing the best-performing, worst-performing, or a weighted combination of assets in the basket, allowing exposure to cross-asset correlation risk.
Ratio Backspread(Call Ratio Backspread)
A Ratio Backspread is an options strategy in which more options are bought than sold at different strikes, creating a position that benefits from a large move in one direction and a net credit entry in many cases, with risk concentrated in the middle of the strike range.
Ratio Spread(ratio call spread)
A ratio spread is an options strategy where a trader buys one or more options and sells a greater number of options at a different strike price with the same expiration, creating an uneven number of long and short contracts that can generate income but also carries uncapped risk in one direction.
Real Estate Derivative(property derivative)
A real estate derivative is a financial instrument whose value is derived from a real estate price index or property-related cash flow, allowing investors to gain or hedge exposure to real estate market movements without buying, selling, or managing physical property.
Reversal (Options Arbitrage)(Reverse Conversion)
A Reversal is the mirror image of a Conversion — a three-leg options arbitrage strategy in which a trader who is short stock buys a call and sells a put at the same strike and expiration, creating a synthetic long that offsets the short stock and locks in a risk-free profit when put-call parity is violated.
Rho (Options Greek)(rho greek)
Rho measures the sensitivity of an option's price to a one-percentage-point change in the risk-free interest rate, indicating how much the option's value will rise or fall as rates shift.
Risk Reversal(Risk Rev)
A Risk Reversal is an options strategy that combines selling an out-of-the-money put and buying an out-of-the-money call (or vice versa) on the same underlying and expiration, creating a position with directional exposure and minimal initial premium outlay.
Roll (Rolling Options)(rolling options)
Rolling an options position refers to closing an existing options contract before expiration and simultaneously opening a new contract with a different expiration date, strike price, or both, in order to extend, adjust, or manage the position.
Seagull Spread(Seagull Option)
A Seagull Spread is a three-leg options strategy that combines a risk reversal with the sale of an additional out-of-the-money option, creating a bounded directional trade that is typically entered at zero or minimal cost, resembling a seagull's wingspan on a payoff diagram.
Skew Trade(volatility skew trade)
A skew trade is an options strategy that profits from changes in the shape of the implied volatility skew — the differential between implied volatility levels across options strikes — rather than from the level of implied volatility or the directional movement of the underlying asset.
Skip-Strike Butterfly(Broken Wing Butterfly)
A Skip-Strike Butterfly is an options strategy in which one of the butterfly's strikes is intentionally omitted, creating unequal wing widths, an asymmetric payoff profile, and often a net credit entry — making it synonymous with the Broken Wing Butterfly.
Straddle(long straddle)
A straddle is an options strategy that involves buying (or selling) both a call and a put at the same strike price and expiration date on the same underlying stock, profiting from large price moves in either direction (long) or from sideways movement (short).
Strangle(long strangle)
A strangle is an options strategy involving the purchase (or sale) of an out-of-the-money call and an out-of-the-money put on the same underlying stock and expiration date, at different strike prices.
Strangle Swap(Strangle Roll)
A Strangle Swap is a position management technique in which an existing strangle position (short or long) is closed and replaced with a new strangle at different strikes, expiration dates, or both, allowing the trader to adjust directional bias, collect additional premium, or extend the trade's duration.
Strike Price(exercise price)
The strike price (also called the exercise price) is the fixed price at which the holder of an option contract can buy (call) or sell (put) 100 shares of the underlying stock.
Swap(interest rate swap)
A swap is an OTC derivatives contract in which two counterparties agree to exchange sequences of cash flows based on different underlying references — most commonly, one party pays a fixed interest rate while the other pays a floating rate on the same notional principal.
Synthetic Long Stock(Synthetic Long)
A Synthetic Long Stock is an options position that replicates the risk-reward profile of owning 100 shares of stock by simultaneously buying an at-the-money call and selling an at-the-money put at the same strike price and expiration.
Synthetic Short Stock(Synthetic Short)
A Synthetic Short Stock is an options position that replicates the risk-reward profile of shorting 100 shares of stock by simultaneously selling an at-the-money call and buying an at-the-money put at the same strike price and expiration.
Tail Hedge(tail risk hedge)
A tail hedge is a portfolio protection strategy specifically designed to produce large positive returns during extreme market events — such as a financial crisis, a sharp equity crash, or a volatility spike — while accepting small but persistent costs during normal market conditions.
Term Structure Trade (Volatility)(vol term structure trade)
A volatility term structure trade is an options or volatility derivatives strategy that profits from changes in the shape or slope of implied volatility across different expiration dates, rather than from the overall level of volatility or the direction of the underlying asset.
Theta(time decay)
Theta is the options Greek that quantifies time decay — the amount by which an option's premium decreases each calendar day as expiration approaches, all other factors remaining constant.
Time Value(extrinsic value)
Time value (or extrinsic value) is the portion of an options premium that exceeds the option's intrinsic value, reflecting the additional worth attributed to the time remaining before expiration and the potential for the option to move further into the money.
Total Return Swap (Equity)(TRS)
An equity total return swap (TRS) is an OTC derivative in which the total return receiver collects all dividends, capital gains, and capital losses of an equity reference asset while paying a fixed or floating rate to the total return payer, replicating full economic equity ownership without transferring legal title.
Vanna(DdeltaDvol)
Vanna is a second-order options Greek that measures how much an option's delta changes for a one-point change in implied volatility, or equivalently, how much vega changes for a one-point change in the underlying's price.
Variance Risk Premium(VRP)
The variance risk premium (VRP) is the persistent spread by which implied variance — the variance level priced into options markets — exceeds subsequently realized variance, representing compensation that option sellers extract from buyers who are willing to pay a premium to hedge against volatility uncertainty.
Variance Swap(var swap)
A variance swap is an over-the-counter derivative contract in which two counterparties exchange a fixed payment (the strike variance) for the realized variance of an underlying asset over the life of the contract, providing pure exposure to volatility without requiring delta-hedging.
Variance Swap (Detailed)(Var Swap)
A Variance Swap is an over-the-counter derivatives contract in which counterparties exchange a fixed variance strike against the subsequently realized variance of an underlying asset, providing pure, path-independent exposure to volatility without the need for delta hedging.
Vega(options vega)
Vega measures the sensitivity of an option's price to a one-percentage-point change in implied volatility, quantifying how much the premium rises or falls as volatility expectations shift.
Vertical Spread(vertical)
A vertical spread is an options strategy that involves buying and selling two options of the same type and expiration but at different strike prices, creating a defined-risk, defined-reward position.
VIX Futures(CBOE volatility futures)
VIX futures are exchange-listed futures contracts traded at CBOE Futures Exchange (CFE) that allow market participants to take long or short positions on the expected level of the CBOE Volatility Index (VIX) at a specified future settlement date.
VIX Option(CBOE VIX options)
A VIX option is an exchange-listed derivative on the CBOE Volatility Index that gives the holder the right, but not the obligation, to buy or sell VIX at a specified strike price, allowing traders to directly position on future implied volatility levels independently of equity market direction.
Volatility Arbitrage(Vol Arb)
Volatility Arbitrage is a trading strategy that seeks to profit from the difference between the implied volatility priced into options and the actual realized volatility of the underlying asset, typically by delta-hedging an options position and capturing the volatility spread.
Volatility Crush(IV crush)
Volatility crush is the sharp decline in implied volatility that occurs immediately after a major binary event — most commonly an earnings announcement — causing options premiums to collapse even if the underlying stock makes a significant move.
Volatility Skew(implied volatility skew)
Volatility skew refers to the asymmetric pattern of implied volatility across options strike prices at the same expiration, most commonly observed in equity markets where out-of-the-money puts carry significantly higher implied volatility than out-of-the-money calls.
Volatility Smile(vol smile)
A volatility smile is the U-shaped pattern observed when plotting the implied volatility of options across different strike prices at the same expiration, reflecting the market's tendency to price out-of-the-money options at higher implied volatility than at-the-money options.
Volatility Swap(vol swap)
A volatility swap is an OTC derivative that exchanges the realized volatility of an underlying asset over a set period for a fixed volatility strike, providing linear exposure to volatility — unlike a variance swap, whose payoff is convex in volatility.
Volga(vomma)
Volga, also called vomma or DvegaDvol, is a second-order options Greek that measures the rate of change of vega with respect to implied volatility — in other words, how much an option's vega increases or decreases as volatility itself moves.
Weather Derivative(weather risk derivative)
A weather derivative is a financial contract whose payoff is linked to a measurable weather variable — such as temperature, rainfall, snowfall, or wind speed — rather than an asset price, enabling businesses exposed to weather-related revenue or cost volatility to hedge that risk in financial markets.
Weekly Options(weeklys)
Weekly options are short-dated options contracts that expire every Friday (or Monday and Wednesday in some cases for major products like SPY and SPX), providing traders with access to shorter-term directional and income-generating strategies with a higher frequency than traditional monthly options.
Wheel Strategy (Options)(The Wheel)
The Wheel Strategy is a systematic options income approach that cycles through selling cash-secured puts until shares are assigned, then selling covered calls against those shares until they are called away — repeatedly generating premium income across a stock position's full life cycle.
Zebraput(Zebra Put)
A Zebraput is a bearish options strategy that combines a long put debit spread with an additional long put at an even lower strike, creating a position with a distinctive tiered profit structure that benefits from moderate to significant declines in the underlying asset.