Options Lingo

Volume

Volume refers to the amount of contracts that are being traded throughout a given trading day. You can see the total number of option contracts that are being traded for each strike price on the options chain.

Implied Volatility

Implied volatility or “IV” is a percentage estimate of how much the price of an option contract is expected to move based on its strike price and expiration date. It’s important to note that IV is based solely on probabilities.

Deep in the money

Deep in the money signifies an option with a strike price that is significantly below (for a call) or above (for a put) the market price of the underlying asset. For example, if a stock is trading at $10 a share and you buy a call at the 5 strike price, your option would be considered deep in the money.

Liquidity

Liquidity refers to how fast and easy it is to enter and exit a trade. The more buyers and sellers that are trading an option, the more liquidity it will have.

Open Interest

Open interest refers to the amount of option contracts that are still open. This means that the original buyer or sell of the option contract has not closed out their opening trade.