| Term | Meaning |
|---|---|
| Ask | The price you can buy a contract at right now. |
| Assignment | When the buyer of an option exercises their right and the seller has to deliver. |
| At the money (ATM) | The strike and the current stock price are nearly the same. |
| Bid | The price you can sell a contract at right now. |
| Breakeven | The price the stock must reach at expiration for you to come out even. |
| Call | Gives you the right to buy the stock at the strike, before expiration. |
| Cash-secured put | Selling a put backed by enough cash to buy the shares if you are assigned. |
| Collateral | The shares or cash locked when you sell an option. |
| Corporate action | An event like a stock split, merger, or name change that can adjust your contract so it keeps its value. |
| Covered call | Selling a call when you already own the 100 shares that back the contract. |
| DNE (Do Not Exercise) | An instruction that stops an in-the-money contract from being exercised automatically at expiration. |
| Exercise | Using the contract's right: buying (call) or selling (put) the stock at the strike. |
| Expiration | The date the contract stops existing: it gets exercised, settled, or expires worthless. |
| In the money (ITM) | The contract would already have value if you exercised it today. |
| Out of the money (OTM) | The contract has no value for now. |
| Premium | The price of the option: what you pay to buy it, or collect to sell it. |
| Put | Gives you the right to sell the stock at the strike, before expiration. |
| Spread | The difference between a contract's bid and ask. The narrower it is, the easier it is to trade close to its real price. |
| Strike | The fixed price the contract lets you buy or sell the stock at. |
| T+2 settlement | The two business days it takes for money or shares to actually move after a trade. |
Options terms glossary on Bitso
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