I learn stock options trading.
Welcome to the Terms section of Ruthless Accountability, where I document the essential vocabulary and concepts of options trading. Every field has its own language, and options are no different.
When I started learning options, the terminology felt overwhelming. Puts, calls, strikes, expiration dates, assignment, moneyness – each term was a puzzle piece I needed to understand.
This section breaks down each concept into practical, digestible explanations. No academic theory or unnecessary complexity – just clear definitions with real examples from my trading journey.
Whether you’re confused about the difference between buying and selling, wondering what “going long” really means, or trying to understand implied volatility, you’ll find straightforward answers here.
These aren’t just dictionary definitions. Each post includes examples with actual numbers, showing how these concepts apply to weekly income generation and risk management.
Master these terms, and options conversations suddenly make sense. The fearsome jargon becomes a useful toolkit for generating consistent returns.
Picture this: It’s Monday morning, 10:30 AM. The market’s been open for an hour, and the opening frenzy has calmed down. You’re looking at a stock chart—let’s say it’s Sunrun Inc (RUN), a solar energy company. Below that chart is an options chain with dozens of strikes, each showing different premiums you could collect.Your finger … Read more
Deep out-of-the-money (Deep OTM) options have strike prices far from the current stock price with very low probability of expiring in-the-money. For calls, deep OTM means strikes significantly above the stock price. For puts, it means strikes significantly below the stock price. These options trade for pennies, have deltas near zero, and almost always expire … Read more
Deep in-the-money (Deep ITM) options have strike prices far from the current stock price, giving them substantial intrinsic value and making them behave almost exactly like stock positions. For calls, deep ITM means strikes significantly below the stock price. For puts, it means strikes significantly above the stock price. These options have deltas approaching 1.00 … Read more
Exercise is when an option buyer chooses to use their rights – either buying 100 shares at the strike price (calls) or selling 100 shares at the strike price (puts). Unlike assignment which happens to option sellers, exercise is an active choice made by option buyers. While most options are closed or expire without exercise, … Read more
At-the-money (ATM) options have strike prices equal to or very near the current stock price, making them the most sensitive and volatile of all options. These options live on a knife’s edge – the slightest move transforms them from worthless to valuable or vice versa. ATM options have maximum time value, highest theta decay, and … Read more
Out-of-the-money (OTM) options have no intrinsic value and would result in a loss if exercised immediately. For calls, OTM means the strike price is above the current stock price. For puts, OTM means the strike price is below the current stock price. These options are the bread and butter of income strategies because they offer … Read more
In-the-money (ITM) options have intrinsic value, meaning they would be profitable if exercised immediately. For calls, ITM means the strike price is below the current stock price. For puts, ITM means the strike price is above the current stock price. These options move almost dollar-for-dollar with the stock, making them behave like stock ownership with … Read more
Moneyness describes the relationship between an option’s strike price and the current stock price, categorizing options as in-the-money (ITM), at-the-money (ATM), or out-of-the-money (OTM). This simple concept drives everything in options trading – from premium levels to assignment probability to strategy selection. Understanding moneyness helps you quickly evaluate risk, choose appropriate strikes, and manage positions … Read more
Assignment occurs when an option buyer exercises their rights, forcing the option seller to fulfill their obligation – buying shares for put sellers or selling shares for call sellers. It’s not a failure or mistake; it’s simply part of the contract you agreed to when collecting premium. For put sellers, assignment means buying 100 shares … Read more
The expiration date is the last day an option contract can be exercised – after this date, the option ceases to exist and becomes worthless if not acted upon. Think of it as the deadline on a coupon: useful until that date, worthless paper afterward. For weekly income traders, expiration dates create 52 opportunities per … Read more