Options Guide & FAQ

The Basics

Call — the right to BUY 100 shares at the strike price until expiry. You buy calls when you expect the stock to go UP.

Put — the right to SELL 100 shares at the strike price until expiry. You buy puts when you expect the stock to go DOWN.

Premium — the price of the contract, quoted per share — 1 contract costs premium × 100. This is the most you can lose as a buyer.

Moneyness — ITM / ATM / OTM

In the money (ITM) — has intrinsic value now. Calls: strike below the stock price. Puts: strike above it. More expensive, moves more like the stock.

At the money (ATM) — strike closest to the current price — highlighted amber in the chain. Most time value, highest gamma.

Out of the money (OTM) — no intrinsic value — pure time value. Cheap lottery tickets that expire worthless unless the stock crosses your strike.

Intrinsic value — what the option is worth if exercised right now (stock − strike for calls, strike − stock for puts, floored at 0). Everything above that is time value, and time value bleeds to zero at expiry.

Reading the Chain

Bid / Ask / Mid — buys fill at the ask, sells at the bid; the gap is the spread — a cost you pay both ways. Mid is the model's fair value between them.

IV (implied volatility) — the annualized move the market prices in. High IV inflates premiums — great to sell, expensive to buy.

Expected move — the ± range the stock is priced to stay within through the selected expiry. Strikes beyond it are long shots.

The Greeks

Spreads (multi-leg)

Spreads combine legs to cap risk and cut cost. The arena currently fills single long calls/puts — you can still leg the same shapes manually.

Vertical spread — same expiry, two strikes (the two above). Max loss = net premium; max gain = strike width − premium.

Advanced Strategies — and when to use them

Butterfly spread — three strikes, defined risk, very cheap. It pays best when the stock finishes exactly at the middle strike — a bet on the market going NOWHERE. Best used in quiet, range-bound tape, and around OPEX when price tends to pin large open-interest strikes. Your edge: butterflies are priced off IV — when IV is elevated but you expect chop, the fly is cheap relative to the range you're betting on.

Straddle — ATM call + ATM put, same strike and expiry. A pure volatility bet — direction doesn't matter, magnitude does. Best used into events (earnings, FOMC, CPI) when you believe the REAL move will exceed the expected move the market has priced in. The trap: after the event IV collapses, so a move smaller than priced loses on both legs at once.

Strangle — the straddle's cheaper cousin — OTM call + OTM put instead of ATM. Lower cost, wider breakevens: needs an even bigger move, but risks less premium.

Iron condor — the seller's side of the range bet — sell an OTM call spread AND an OTM put spread. Collects premium when price stays inside the range. Best in HIGH IV that you expect to fall, in markets without a catalyst on the calendar.

Matching strategy to market — trending market → directional verticals (bull call / bear put) keep cost and risk defined while riding the trend. Range-bound / low-energy market → butterflies and iron condors monetize the chop. Event on the calendar → straddles/strangles if you think the move is underpriced; condors if you think it's overpriced. The recurring edge in all of them: compare the expected move the chain is pricing against the move YOU forecast, and buy volatility when it's cheap, sell it when it's rich.

Expiry & OPEX

Expiry — the contract's last day. In the arena, contracts crossing their expiry auto-settle at intrinsic value — worthless if OTM.

O — monthly OPEX — the purple O in the expiry strip marks the 3rd Friday of the month: the standard monthly expiration. The largest open interest concentrates there, so pinning to big strikes and sharper moves into the close are common.