Options, in plain language.
Short definitions, one example and the mistake to avoid. Understand the terms used in the Shortput guidelines without leaving the site.
Examples are hypothetical, for standard 100-share puts, before fees, taxes, financing and interest. They are not trade recommendations.
Delta
An estimate of how much an option’s per-share price changes for a $1 move in the underlying, with other inputs unchanged.
Example: A long-put Delta of −0.25 implies roughly a $0.25 price decline for a $1 stock rise. A seller’s position has the opposite sign.
Shortput displays long-put Delta. Use its absolute value for the guideline range; it is not an exact probability of profit.
DTE · days to expiration
The calendar days remaining until expiration, not the number of trading sessions.
Example: 365 DTE is roughly one year until expiration, not a required one-year holding period. After 30 calendar days, about 335 DTE remains; you can seek to buy back the put before then.
A larger annualization factor is not extra profit. Shortput does not apply this annualization formula to 0DTE.
IV · implied volatility
A volatility input inferred from option prices through a pricing model, rather than a measurement of past price moves.
Example: An IV of 40% is not a prediction that the stock will rise 40%, nor a hard limit on its price range.
Reference IV summarizes a chosen series; it need not equal one contract’s IV. Check the series, tenor and observation time before comparing tools.
IVR · IV Rank
Where current IV sits between the low and high of a chosen historical window, on a 0–100 scale.
Example: With a low of 20%, high of 60% and current IV of 30%, IVR = (30 − 20) / (60 − 20) × 100 = 25.
A historical spike can distort the range. Our ≥20 entry filter is a house starting rule, not a proven trading edge; missing data is not zero.
IVP · IV Percentile
The percentage of historical IV observations below the current IV, within a chosen window.
Example: If 189 of 252 observations are below today’s IV, IVP = 189 / 252 × 100 = 75%.
IVP is not IVR or a win rate. Check the window and tie handling; the guide’s ≥50% filter is a preference, not a guaranteed edge.
Bid–ask spread
Ask minus bid, quoted per share. Mid is their midpoint, not a promised execution price.
Example: Bid $1.40 and ask $1.60 give a $0.20 spread and $1.50 mid. The bid–ask gap is $20 for a standard 100-share contract.
That $20 is not a mandatory fee. Check fresh, two-sided quotes and size; the matrix’s $1 spread scale is a display limit, not a quality threshold.
OI · open interest
Outstanding contracts at an observation time. Volume counts contracts traded during a period instead.
Example: OI of 1,200 and today’s volume of 80 describe different counts. Neither means 1,200 contracts can be traded now at the displayed price.
Read the date and actual bid/ask size. OI bars are normalized within each expiration column, not across the whole matrix.
Assignment
Being required to fulfil a sold option’s contract. A physically settled short put requires buying the underlying at the strike.
Example: One standard $95 put requires buying 100 shares for $9,500 if assigned, regardless of the lower margin initially posted.
American-style puts can be assigned before expiration. Wanting the shares does not guarantee assignment or prevent a loss after purchase.
Margin
Collateral required by a broker, subject to account and position rules. It can increase when markets move against you.
Example: Shortput’s hypothetical $95 put can show $1,650 estimated margin, but assignment still requires a $9,500 share purchase.
The estimate is neither your broker’s actual requirement nor a maximum loss. Insufficient funds can lead to forced liquidation.
Annualized ROI
Shortput’s simple comparison: premium ÷ capital × 365 ÷ DTE. It does not compound or predict a year of profits.
Example: $150 premium on $9,500 cash over 30 DTE is 1.58% of cash, or 19.21% simply annualized, before costs and losses.
Changing to estimated margin changes the denominator, not the premium or purchase obligation. This is not the P50 profit target.
P50 / P80 / P90 · profit capture
Here, P50 means profit equal to 50% of the initial premium. P80 and P90 mean 80% and 90%. It is not a probability or return on margin.
Example: Collect $200: buying back for $100 leaves $100 profit (P50); $40 leaves $160 (P80); $20 leaves $180 (P90), before fees and taxes.
Before execution, use a realistic buyback cost to estimate (premium − cost) ÷ premium. A mid-price mark is not a locked-in profit; confirm the actual fill.
Gamma
How quickly Delta changes as the underlying moves. It tends to be higher near expiration when the option is near the money.
Example: Close to expiration, a stock crossing back and forth around the strike can make a put’s Delta change rapidly.
Not all near-expiry options have high Gamma. Short puts have negative position Gamma, and a low premium does not remove gap risk.
Outliers / tail risk
Unusually large adverse outcomes beyond the routine moves a strategy is built around. A short put can lose much more than the premium collected.
Example: Hypothetical: collect $200 for one $95 put. If the stock is $60 at expiration, the loss is ($95 − $60) × 100 − $200 = $3,300, before costs.
Small premiums, high IVR or many prior wins do not cap this loss. Gaps can prevent a planned exit price; rolling does not erase a realised loss.