Options Glossary
This glossary is written for beginners. It explains key short-put terms in simple language so you can make cleaner decisions.
What this glossary gives you
- Clear definitions without jargon overload.
- Practical meaning: why each term matters for risk and execution.
- A consistent language layer for Screener, Analyzer Engine, and Portfolio Planner.
How to use this page during decisions
- When a term appears in the product, match it here first.
- Focus on relative reading (higher/lower, tighter/wider), not fixed numbers.
- Use definitions to compare two setups side by side, not to justify one premium value.
Most common abbreviations
These are the abbreviations you will see most often in options workflows.
| Abbreviation | Meaning | How to use it |
|---|---|---|
| DTE | Days To Expiration | Defines how long the contract is still open. |
| BE | Break-even | The price level where your position result is around zero. |
| OI | Open Interest | Shows existing open contracts and helps judge market depth. |
| MWF | Monday/Wednesday/Friday expirations | Stocks with additional Monday and Wednesday expirations beyond regular Friday. |
Core terms and practical interpretation
Definition: Selling a put while reserving enough cash to buy 100 shares at strike if assigned.
Why it matters: It is an entry strategy with income, not just a premium collection trade.
How to read it: Only use it on stocks you are willing to own after assignment.
Definition: Options metric used as a practical proxy for strike proximity and assignment likelihood.
Why it matters: Helps compare probability/risk profile across candidate contracts.
How to read it: Lower absolute delta is usually more conservative; higher usually means more risk and more premium.
Definition: Distance between current underlying price and break-even level.
Why it matters: Shows the downside buffer created by premium before break-even is reached.
How to read it: Higher BE Distance usually means more cushion.
Definition: Signal that spread, volume, or open interest quality is weaker.
Why it matters: Weak liquidity can create worse fills and higher slippage.
How to read it: Prefer setups without liquidity warning when consistency matters.
Definition: Difference between bid and ask price in the option quote.
Why it matters: A wide spread often increases execution cost and uncertainty.
How to read it: Tighter spread is usually execution-friendly.
Definition: Expiration cadence used for shortlist and comparison.
Why it matters: Mixing cycles randomly can reduce comparability.
How to read it: Keep cycle and DTE window consistent across decisions.
Definition: Estimated capital needed for one contract in your selected model.
Why it matters: Controls position size and concentration risk before execution.
How to read it: Lower capital per setup supports broader diversification.
Definition: Cash premium collected when selling one contract.
Why it matters: Direct income component, but not a full risk-quality signal.
How to read it: Never rank by premium alone; read together with delta, BE Distance, and liquidity.
Common confusions to avoid
- Higher premium does not automatically mean better setup quality.
- Lower delta does not replace BE Distance and liquidity checks.
- No warning does not mean zero risk. It means fewer visible red flags in current data context.
- Good single contract metrics can still be a poor portfolio decision if concentration is high.