Option Terms Overview

Options are an exciting way to maximize your efforts in the markets but they do come with unfamiliar terminology which may seem confusing at first. Watch the videos below to get a better understanding of the jargon and more comfortable using it in class and in your trading.

Option Premium

Term used to describe an option’s price.

Intrinsic Value

Term used to describe “in-the-money” value.

Extrinsic Value

Term used to describe the Time value.

In-the Money, Out-of-the-Money, At-the-Money

Term used to describe the relative value of the option’s strike price to the underlying’s current price.

Option Assignment

Term used to describe what automatically happens if options is held to expiration.

The Greeks

A description of the factors used to calculate an option’s price. NOTE: Vega is the mechanism by which the market makers inflate or deflate the value of time.