Equity Options Key Metrics Flashcards
(12 cards)
How many key metrics are there?
11
Expiry (Expiration Date)
The last day the option can be exercised. After midnight, the ticket is worthless.
“Use it or lose it by this date.”
Type (Call/Put)
Call = Right to buy the stock
Put = Right to sell it
“Call = coupon to buy;
Put = coupon to sell”
Premium
The upfront price you pay for the option-your entry fee
“The ticket price for the right, not the obligation”
Delta
How much the option’s price should move when the stock moves $1. A delta of 0.60 means the option rises ~60 ¢
if the stock rises $1
“Sensitivity dial between stock moves and option price”
Gamma
How much delta itself changes when the stock moves $1.
High gamma = delta can jump quickly
“Delta’s accelerator pedal”
Theta
How much value the option loses each day (all else equal).
Negative for holders.
“Daily rent you pay for owning the option”
Vega
How much the option’s price changes if implied volatility (IV) moves 1 percentage point
“What you gain or lose when the market gets jumpier or calmer”
probITM / probOTM
Computer-estimated probability the option ends In The Money or Out Of The Money at expiry
“Stat-based odds your bet finishes ahead (or not)”
IV (Implied Volatility)
The market’s forecast of future stock volatility baked into the option price.
Higher IV = pricier options
“The crowd’s best guess on how wild the ride could be”
Volume
Number of contracts traded today.
Shows current buzz
“How many tickets changed hands today”
Open Interest
Total live contracts still outstanding after today’s close.
Tracks lingering positions
“How many tickets are still in play”
