Finance glossary
Options and trading concepts, side by side
American-Style Option vs European-Style Option
An American-style option can be exercised on any eligible business day through expiration, while a European-style option can be exercised only at expiration.
Bollinger Bands vs Keltner Channels
Bollinger Bands set their width from the standard deviation of closing prices, while Keltner Channels set it from Average True Range, which also registers gaps.
Bull Call Spread vs Bull Put Spread
A bull call spread pays a debit and a bull put spread collects a credit, but at matching strikes and expiration both create the same bullish payoff after financing.
Call Option vs Put Option
A call option gives the holder the right to buy the underlying at the strike, while a put gives the right to sell it, so they express opposite directional views.
Contango vs Backwardation
Contango is an upward sloping futures curve with deferred contracts above nearer ones, while backwardation is the inverted curve where the near contract prices highest.
Covered Call vs Cash-Secured Put
A covered call sells a call against 100 shares you already own, while a cash-secured put sells a put backed by enough cash to buy 100 shares at the strike if assigned.
Dark Pool vs Alternative Trading System (ATS)
An alternative trading system (ATS) is a non-exchange venue operating under Regulation ATS, and a dark pool is an ATS that does not display orders before execution.
Debit Spread vs Credit Spread
A debit spread pays net premium to open and a credit spread collects it, but the strikes, expiration and entry price, not the label, determine the payoff.
Delta Hedging vs Gamma Scalping
Delta hedging offsets the current directional exposure of an option position, while gamma scalping repeats that hedge from long gamma to harvest realized volatility.
Exchange-Traded Fund (ETF) vs Mutual Fund
An ETF trades on an exchange throughout the session at a market price, while a mutual fund transacts at the next net asset value calculated after it receives the order.
Fibonacci Retracement vs Fibonacci Extension
A Fibonacci retracement measures the pullback inside a price swing, while a trend-based Fibonacci extension projects that swing from the pullback to map price targets.
Gamma Exposure vs Off-Exchange Short-Volume Ratio
Compare modeled option exposure with reported off-exchange share transactions: inputs, formulas, timing and how to read the two together.
Gamma vs Vanna
Gamma measures how an option delta changes when the underlying price moves, while vanna measures how that same delta changes when implied volatility moves.
Golden Cross vs Death Cross
A golden cross prints when a shorter moving average, usually the 50-day, crosses above a longer one, usually the 200-day, and a death cross prints when it crosses below.
Implied Volatility vs Realized Volatility
Implied volatility is the forward-looking movement priced into an option premium, while realized volatility measures the movement an underlying actually produced.
In the Money vs Out of the Money
An in-the-money option has intrinsic value because exercising it captures value, while an out-of-the-money option has none, so its whole premium is extrinsic value.
Intrinsic Value vs Extrinsic Value
Intrinsic value is the amount an option is in the money right now, floored at zero, while extrinsic value is the rest of the premium, which decays to zero by expiration.
Iron Condor vs Iron Butterfly
An iron condor sets its short put and call at two strikes for a band of maximum profit, while an iron butterfly stacks both at one strike for a single profit peak.
Margin vs Portfolio Margin
Standard Regulation T margin charges each position a fixed percentage, while portfolio margin sets the requirement to the largest projected loss across stress scenarios.
Market Maker vs High-Frequency Trading (HFT)
A market maker is a registered dealer that quotes two-sided prices for its own account, while high-frequency trading is a trading style marked by speed and short holds.
Market Order vs Limit Order
A market order trades promptly at the best available prices but gives up price control, while a limit order sets the worst acceptable price but may never fill.
Open Interest vs Volume
Volume counts the contracts traded during a session, while open interest counts the contracts still outstanding after clearing and carries forward from day to day.
Options vs Futures
An option buyer pays a premium for the right to buy or sell at a set price, while both sides of a futures contract are obligated to trade at the agreed price.
Options vs Stocks
Stocks provide company ownership. Options provide rights through an expiration date. Compare entry cost, leverage and profit with a worked stock-versus-call example.
Payment for Order Flow (PFOF) vs Maker-Taker Pricing
Payment for order flow compensates a broker for routing orders, while maker-taker pricing is an exchange fee schedule that pays liquidity adders and charges removers.
Relative Strength Index (RSI) vs Stochastic Oscillator
RSI compares the size of recent gains with recent losses, while the stochastic oscillator measures where the latest close sits inside its recent high-low range.
Sharpe Ratio vs Sortino Ratio
The Sharpe ratio divides excess return by the standard deviation of all returns, while the Sortino ratio divides return above a target by downside deviation only.
Short Selling vs Put Option
Short selling borrows and sells shares with no cap on the loss, while buying a put pays a premium for the right to sell at a strike and caps the loss at that premium.
Simple Moving Average (SMA) vs Exponential Moving Average (EMA)
An SMA gives equal weight to every price inside a fixed window, while an EMA gives the newest price the most weight and keeps a decaying influence from older prices.
Stop Order vs Stop-Limit Order
A stop order becomes a market order once triggered and favors completion, while a stop-limit order becomes a limit order that protects the price but can go unfilled.
Straddle vs Strangle
A straddle pairs a call and a put at one strike, while a strangle uses a higher call strike and a lower put strike, trading a lower premium for wider breakevens.
Support and Resistance vs Order Block
Support and resistance are broad price areas where traders watch for buying or selling pressure, while an order block is the candle zone where an impulsive move began.
Sweep Order vs Block Trade
A sweep order describes speed, one order split across venues to fill at once, while a block trade describes size, a large order often negotiated or crossed in one print.
Theta vs Vega
Theta measures how much an option’s theoretical value changes as one day passes, while vega measures how much it changes for a one-point move in implied volatility.
Value at Risk (VaR) vs Conditional VaR (Expected Shortfall)
Value at Risk is a loss level expected to be exceeded only a set percentage of the time, while conditional VaR, or expected shortfall, is the average loss in that tail.
Vertical Spread vs Calendar Spread
A vertical spread uses two strikes in one expiration and fixes its payoff at entry, while a calendar spread uses one strike in two expirations and has no fixed payoff.
Volatility Skew vs Volatility Smile
Volatility skew is any variation in implied volatility across strikes in one expiration, while a volatility smile is one shape of it, with both wings above the center.