Greeks and pricing
Delta
How much an option's price moves for a $1 move in the underlying. Also a rough proxy for the probability of finishing in the money.
Gamma
How much delta itself changes as the underlying moves. High gamma means a delta that shifts fast, which forces whoever is hedging to trade more often. See gamma exposure.
Theta
Time decay — the value an option loses per day, all else equal. Accelerates sharply in the final days and becomes near-vertical on expiry day.
Vega
Sensitivity to implied volatility. Largely irrelevant on 0DTE contracts, dominant on longer-dated ones.
Charm
Delta decay over time. Drives the persistent afternoon drift often seen on expiration days as dealers unwind hedges.
Vanna
How delta changes as implied volatility changes. Falling IV frequently unwinds dealer hedges in a direction that supports price.
Implied volatility (IV)
The volatility the market is pricing into an option. Rises into uncertainty and collapses after it resolves — the mechanism behind IV crush.
IV crush
The sharp drop in implied volatility after a scheduled event, which can lose money on a correctly-directioned position.
Extrinsic value
The portion of premium above intrinsic value. What time decay consumes. Zero at expiry.
Dealer positioning
Gamma exposure (GEX)
An estimate of how much stock dealers must trade to stay hedged as price moves. Positive suppresses volatility, negative amplifies it.
Gamma flip
The price where aggregate dealer gamma crosses from positive to negative. Above it expect pinning, below it expect trends to extend.
Call wall
The strike above spot with the largest positive gamma concentration. Often behaves as resistance.
Put wall
The mirror below spot. Often behaves as support; breaking it is frequently violent.
Long gamma
Dealer position where hedging leans against price movement — sells into strength, buys weakness.
Short gamma
Dealer position where hedging chases price — buys strength, sells weakness. Amplifies moves.
Pinning
Price gravitating toward a high-open-interest strike into expiry as hedging flow suppresses movement away from it.
Open interest (OI)
Total contracts outstanding at a strike. Volume exceeding OI signals new positioning rather than adjustment.
Market structure
Break of structure (BOS)
A new high in an uptrend or new low in a downtrend. A continuation signal.
Change of character (CHoCH)
The first structural break against the prevailing trend. The earliest evidence the trend may be ending.
Liquidity pool
A cluster of resting stop orders, typically above a swing high or below a swing low.
Liquidity sweep
Price taking out a pool of stops and immediately reversing back inside the prior range.
Fair value gap (FVG)
A three-candle imbalance where the outer wicks do not overlap, marking a range of one-sided trading. Often revisited.
Inverse fair value gap (IFVG)
An FVG that price traded through and then rejected from the opposite side, flipping its expected role.
Order block
The last opposing candle before an impulsive move. Used as a zone where resting interest may remain.
Displacement
A large, fast directional candle that leaves an imbalance behind it. The signature of aggressive participation.
Equal highs / lows
Two or more matching extremes. Obvious to everyone, which is precisely why the stops behind them get run.
Contracts and execution
0DTE
An option expiring the same trading day. Enormous gamma, near-vertical theta. See the full guide.
SPX
Cash-settled European-style index options on the S&P 500. No early assignment, no dividend risk, Section 1256 tax treatment in the US.
European style
Exercisable only at expiry. SPX is European.
American style
Exercisable any time before expiry, creating early assignment risk. SPY is American.
Section 1256
US tax classification applying to broad-based index options, taxed 60% long-term and 40% short-term regardless of holding period.
Sweep
An order filled across multiple exchanges at once, prioritising speed over price.
Block
A single large fill, often privately negotiated. Frequently a hedge rather than a directional bet.
Slippage
The difference between the price you expected and the price you got. Grows with spread width and speed of movement.
Bid-ask spread
The gap between the best buy and sell price. On thin option contracts this is a real and often underestimated cost.
Risk and desk shorthand
Risk per trade
The fixed percentage of account capital a single position is permitted to lose. Most desks run 0.5–2%. See position sizing.
Fixed fractional sizing
Risking the same percentage of capital on every trade regardless of conviction.
Kelly criterion
A formula for the growth-maximising bet size. Full Kelly is too aggressive in practice; fractional Kelly is the usable version.
R multiple
Profit or loss expressed in units of initial risk. A trade that made three times what it risked is +3R.
Expectancy
Average profit or loss per trade across a sample. Positive expectancy is the only thing that matters long-term.
Drawdown
The decline from a peak in account value. Recovery is asymmetric — down 50% requires 100% to return to flat.
Stopped
On our record: price hit the stop loss stated in the original alert.
Target
On our record: price reached the profit target stated in the original alert.
Risk disclosure
Trading options involves substantial risk of loss and is not suitable for every investor. Options can expire worthless. It is possible to lose the entire amount paid for a position in a single session.
Rawstocks LLC is a trading education and analysis community. We are not a registered investment adviser or broker-dealer, and nothing published here constitutes personalized investment advice. Past performance does not indicate future results. Read the full disclosure.