Option
A reservation ticket with a deadline — the right to buy or sell at a set price before a date.
Premium
The price of the ticket — what the seller collects. The insurance premium.
Strike price
The locked-in price printed on the coupon.
Expiration
The deadline — when the ticket turns into a pumpkin.
Call
A coupon to BUY. Bet the price Climbs.
Put
A coupon to SELL — protection if the price Plummets.
Selling premium
Being the insurance company — collect cash, hope nothing happens. (a.k.a. income trading)
Theta / decay
The melting ice cube — the seller's daily paycheck as time passes.
Implied vol (IV)
How scared the market is = how pricey insurance is right now.
Realized vol
How much the stock actually moved.
VRP
Insurance is overpriced vs. reality (IV richer than realized). Sell umbrellas during the panic.
OTM
"Out of the money" — the coupon ended up worthless. Good, if you sold it.
P(OTM)
The odds the stock stays in the box and the coupons expire worthless.
Spread
Sell one coupon, buy a cheaper one further out as a guardrail.
Put / call spread
The two rails — one set below the price, one set above.
Iron Condor
Two spreads = a box. Bet the stock stays in its lane until the deadline.
Defined risk
Guardrails on — your worst case is a known, capped number.
Width ($5-wide)
How far each rail sits from its guardrail — it sets the max risk.
Credit
The cash collected up front for selling the package.
ROC
"Return on capital" — the rent earned on your held security deposit.
Assignment
Someone uses their coupon on you — you must deliver. Guardrails cap the cost.
Earnings
Scheduled chaos. A demolition derby with a start time — never hold a condor through it.