Glossary of Market Terms
Every term we use on this site, defined in plain English
Financial jargon is often used as a substitute for explanation. These definitions are written to be understood on first reading, and where a term is commonly misused we say so. Terms are grouped by the part of the site where you are most likely to meet them.
Options terms
Call option
A contract giving the holder the right, but not the obligation, to buy 100 shares of the underlying stock at a fixed price (the strike) on or before a set date. The seller of the call takes on the matching obligation to deliver those shares if the holder exercises.
Put option
A contract giving the holder the right, but not the obligation, to sell 100 shares at the strike price on or before a set date. The seller of the put is obliged to buy those shares if assigned.
Strike price
The fixed price at which the option can be exercised. It is set when the contract is listed and does not change.
Premium
The price paid by the buyer to the seller for the option contract, quoted per share. Because a standard contract covers 100 shares, a quoted premium of $0.40 means $40 in cash for one contract.
Out of the money (OTM)
An option with no intrinsic value at the current share price: a call whose strike sits above the share price, or a put whose strike sits below it. Our options income screen considers only out-of-the-money contracts.
At the money (ATM)
An option whose strike is closest to the current share price. These contracts carry the most time value and are the basis for the implied move calculation.
Delta
How much an option's price is expected to change for a $1 move in the underlying stock. Delta is also widely used as a rough proxy for the probability that the option finishes in the money, so a 0.20-delta put is loosely read as having about an 80% chance of expiring worthless. That reading is an approximation that assumes a particular distribution of price outcomes and understates genuine tail risk.
DTE (days to expiry)
The number of calendar days remaining until the option contract expires.
Implied volatility (IV)
The amount of future price movement implied by an option's current market price, expressed as an annualized percentage. It is the market's forward-looking expectation rather than a measurement of past movement. Higher implied volatility means richer premium for sellers, but also a genuinely wider range of expected outcomes.
Historical volatility (HV)
The actual realized volatility of a stock over some past window, calculated as the standard deviation of its logarithmic returns and scaled to an annual figure. Unlike implied volatility, it is backward-looking.
IV Rank
Where today's implied volatility sits within its own range over the past year, on a scale of 0 to 100. It answers a question the raw IV number cannot: is this stock unusually volatile right now, or is it simply always volatile? An IV Rank near 100 means current implied volatility is at the top of its one-year range.
Volatility crush
The sharp fall in implied volatility immediately after a scheduled event such as an earnings report. Uncertainty is priced into options beforehand and disappears once the outcome is known, which is why buying options into an earnings announcement can lose money even when the stock moves in the anticipated direction.
Cash-secured put
Selling a put option while setting aside enough cash to buy the shares if assigned. The seller collects the premium and either keeps it outright or ends up purchasing the stock at the strike, with the premium reducing the effective cost.
Covered call
Selling a call option against 100 shares already owned. The seller collects the premium in exchange for capping the upside at the strike price, since the shares may be called away if the stock rises above it.
Assignment
What happens when the buyer of an option exercises and the seller must fulfil the contract: delivering shares for a call, or purchasing them for a put. American-style options can be assigned before expiry, not only at it.
Open interest
The total number of option contracts currently outstanding for a given strike and expiry. Unlike volume, which counts a single day's trading, open interest measures how many positions remain open, and is a better indicator of whether a contract can be traded without difficulty.
Bid-ask spread
The gap between the highest price a buyer is offering and the lowest a seller will accept. It is an immediate and unavoidable cost of trading, and it is typically much wider on options than on the underlying shares.
Mid price
The midpoint of the bid and the ask. It is the conventional estimate of an option's fair value, but it is not a price at which you are guaranteed to be filled.
Straddle
Holding both a call and a put at the same strike and expiry. The combined price is what the market charges for exposure to a move in either direction, which is what makes it the basis for estimating an expected move.
Implied earnings move
An estimate of how far a stock is expected to move in reaction to its earnings report, derived by dividing the at-the-money straddle price by the current share price. It estimates magnitude only and says nothing about direction.
Put/call ratio
Put volume divided by call volume, or the inverse, used as a rough sentiment gauge. It is noisier than it appears, because volume cannot distinguish an opening trade from a closing one, nor a directional bet from a hedge.
Annualized yield
A short-dated return scaled up to a yearly rate, calculated here as (premium divided by capital at risk) multiplied by (365 divided by days to expiry). It is useful for comparing contracts with different expiries against each other, and misleading if read as a return you can expect to earn, since it assumes the same trade repeats all year at the same yield.
Volatility and sentiment
VIX
The Cboe Volatility Index, derived from S&P 500 index option prices, representing expected annualized volatility over the coming 30 days. It rises when investors bid up the price of protection, which is why it is nicknamed the fear index.
VXN
The same concept applied to the Nasdaq-100. Because that index is more concentrated in high-growth technology companies, VXN sits at a structurally higher baseline than VIX, so the two cannot be compared at face value.
Relative volume
Current trading volume divided by the average volume over a recent window, twenty sessions in our case. It distinguishes a price move that many participants took part in from one that happened on a quiet tape.
Drawdown
The decline from a portfolio's previous peak to its subsequent low, expressed as a percentage. It is usually a more informative measure of risk than volatility, because it describes the loss an investor would actually have had to sit through.
Equities and strategy
Zacks Rank
A quantitative stock rating published by Zacks Investment Research on a scale from 1 (Strong Buy) to 5 (Strong Sell), driven substantially by the direction and magnitude of recent analyst earnings-estimate revisions.
Bull of the Day / Bear of the Day
Single-stock editorial picks published each trading day by Zacks. Portfolio Watch records them daily and simulates a strategy that follows the bull picks; the bear picks are recorded and displayed but never traded in that simulation.
Dollar-cost averaging (DCA)
Investing a fixed amount at regular intervals rather than all at once. Our strategy chart uses a $100-per-market-day schedule for both the strategy and its benchmark, so that the comparison reflects security selection rather than differences in funding timing.
Backtest
A simulation of how a set of rules would have performed on historical data. Backtests are hypothetical by nature and tend to flatter the strategy, because costs are underestimated and the rules are often shaped, consciously or not, by knowledge of what already happened.
Benchmark
The reference return a strategy is measured against. We use SPY, an ETF tracking the S&P 500, funded on exactly the same schedule as the strategy so the two are comparable.
BMO / AMC
Before market open and after market close: the two conventional slots in which companies release earnings. Our calendar classifies a report as BMO when it is scheduled before 2:00 PM Eastern and AMC otherwise.
Ex-dividend date
The first day a stock trades without entitlement to the next declared dividend. Buyers on or after this date do not receive that payment, and the share price typically opens lower by roughly the dividend amount.
Short interest (% of float)
The proportion of a company's freely tradable shares that have been sold short. High readings indicate significant bearish positioning, and can also set up sharp upward moves if those positions are forced to close.
Commodities
Spot price
The price for immediate delivery of a commodity. We reference the front-month futures contract, which is the standard proxy for spot in gold, silver, and platinum.
Gold/silver ratio
How many ounces of silver one ounce of gold buys. A high ratio means silver is cheap relative to gold, which has historically tended to occur in risk-off conditions. The ratio has drifted structurally over long periods, so there is no fixed level it reliably returns to.
Physically-backed ETF
An exchange-traded product holding the actual metal in custody, allowing exposure through an ordinary brokerage account. It charges an expense ratio, which causes slow drift against the spot price over time, and can trade at a small premium or discount to the value of the metal it holds.
For the formulas and thresholds behind these terms as we apply them, see the Learn guides and the methodology page.
Important Notice: These definitions are provided strictly for informational and educational purposes and do not constitute investment advice, financial guidance, or a recommendation to buy or sell any security. Options in particular carry additional risks, including the total loss of premium paid and obligations arising on assignment. Always perform your own due diligence and consult a licensed financial advisor before making financial decisions.