Options & Derivatives
Historical vs Implied Volatility
Historical volatility measures past variation. Implied volatility is an option-model input inferred from a market price.
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Options and Derivatives
Learn options, volatility, hedging, expiration and derivatives mechanics through explanatory guides and worked examples.
18 guides. Start with the introductory topics; follow related links inside each guide.
Options & Derivatives
How to Read a Volatility Cone
A price target is a single point. A cone is the honest version: every price the asset could plausibly reach, and how the range of possibilities widens the further out you look.
Options & Derivatives
What Is Expected Move in Options Trading?
An expected-move figure needs a definition. A volatility-based terminal band and a straddle’s break-even move answer different questions.
Options & Derivatives
Understanding Options Volatility Skew
If markets moved symmetrically, every strike would carry the same implied volatility. They do not — and the shape of that asymmetry is one of the more honest fear gauges available.
Options & Derivatives
How Square-Root-of-Time Scaling Expands Probability Cones
With uncorrelated returns and constant variance, uncertainty grows with √time. Those assumptions need to accompany the number.
Options & Derivatives
Option-Implied Probabilities vs Normal Distribution Models
Textbook models assume a tidy bell curve. Option prices reveal what traders actually believe — and it is lumpier, fatter-tailed and more lopsided than the textbook.
Options & Derivatives
What Is a Probability Ladder?
Instead of one number for one target, a ladder gives you the odds for every level that matters — and separates 'gets there' from 'finishes there'.
Options & Derivatives
Straddle Pricing Explained
A straddle is the purest way to buy movement without picking a side — which is exactly why its price is the market's own estimate of how much movement is coming.
Options & Derivatives
Implied volatility explained: IV, earnings and the VIX
Learn what implied volatility measures, how it differs from realised volatility, and how earnings expectations and the VIX relate to option prices.
Options & Derivatives
Delta Explained: What It Tells You
Delta tells you how much an option's price should move for every dollar move in the stock — and it's the building block for every other option Greek.
Options & Derivatives
Gamma Explained: The Second-Order Risk
Gamma measures how fast delta itself shifts, and it's the reason options exposure can flip from mild to explosive in the final days before expiration.
Options & Derivatives
Open Interest Explained
Open interest counts how many option contracts are still open, and reading it alongside volume reveals whether new money is entering or old positions are closing.
Options & Derivatives
Max Pain Theory Explained
Max pain theory claims stocks drift toward the strike that hurts option buyers most — a tidy idea with a shaky track record.
Options & Derivatives
Gamma Squeeze Explained
A gamma squeeze is what happens when dealer hedging turns a wave of call buying into a self-reinforcing rally, independent of any short sellers.
Options & Derivatives
Dealer Positioning: Long vs Short Gamma
Whether options dealers are long or short gamma quietly shapes how calm or chaotic a market feels, by determining if their hedging cushions moves or accelerates them.
Options & Derivatives
What Are 0DTE Options?
Zero-days-to-expiration options expire the same day they're traded, combining rock-bottom prices with some of the fastest-moving risk in the options market.
Options & Derivatives
Covered Calls Explained
A covered call trades away some of a stock's upside for steady premium income — a strategy built for sideways-to-modestly-bullish markets, not breakouts.
Options & Derivatives
Protective Puts Explained
A protective put is portfolio insurance in option form — a purchased put that caps downside on a stock you already own, at the cost of an ongoing premium.