These terms are important to know as you advance as an options trader — but they should not prevent you from getting started. You can begin selling covered calls successfully with just a few simple rules and an understanding of Delta and Theta. Don't let the jargon intimidate you. We start with small positions, follow a mechanical process, and build your confidence one trade at a time.
IV Crush
When implied volatility drops sharply after a big event (like earnings), option prices can collapse quickly. This is usually good if you sold options, but it can look scary on your screen.
Gamma Spike
Gamma measures how fast an option's Delta changes when the stock moves. A gamma spike happens near expiration, when small stock moves cause big changes in your position's risk.
Put/Call Skew (Volatility Skew)
Puts are usually more expensive than calls at the same distance from the current price. This skew exists because investors fear crashes more than big rallies.
Pin Risk
This occurs when the stock price is very close to your strike at expiration. You're unsure whether the option will be exercised or not.
Tail Risk
The risk of a rare, extreme market move (a “black swan”) that causes much larger losses than normal.
CVaR (Conditional Value at Risk)
An advanced way to measure how bad your losses could get in the worst-case scenarios — more sophisticated than simple max loss.
Beta Weighted Delta
Shows your overall portfolio's directional exposure, adjusted for how much each stock moves relative to the broad market (SPX).
Naked Calls
Selling a call without owning the stock. This has theoretically unlimited risk if the stock skyrockets.
Naked Puts
Selling a put without having the cash or margin to buy the stock if assigned. Risk is large but limited (a stock can only go to zero).
Positive / Negative Delta & Theta
These are the important ones — learn them here. Positive Delta = your position makes money when the stock price goes up. Negative Delta = your position makes money when the stock price goes down. Theta = time decay, collected daily.