Derivatives Glossary

Assignment risk is the chance a short option becomes delivery or cash-settled obligation. NSE equity vs index, expiry week habits.

ATM strike is where spot ≈ strike. Delta and liquidity hub on Nifty weeklies.

Backwardation is when near futures trade below spot or far futures — positive roll yield for some long carries. Learn NSE index futures curve context.

Basis is the gap between futures and spot/cash price. Learn contango, backwardation, and roll implications for Nifty and Bank Nifty journals.

Butterfly combines strikes for limited risk around pin. Expiry-week Nifty structures.

Calendar spread uses different expiries same strike. Theta and vol term structure on NSE.

A call option gives the right to buy the underlying at the strike. Long vs short, weekly Nifty use, and journal tagging.

Cash-secured put sells put with cash reserved. Wheel-style entry on NSE large caps.

Cash settlement pays the profit or loss in cash at F&O expiry without delivering shares. Learn how NSE cash settlement works for index derivatives and journal treatment.

Contango is when longer-dated futures trade above nearer contracts or spot. Learn roll cost impact on Nifty futures and journal tracking for roll traders.

Covered calls sell calls against owned stock. Income vs upside cap on NSE holdings — journal structure tags.

Credit spreads sell one option and buy a further OTM leg. Defined risk premium selling on Bank Nifty weeklies.

Debit spread buys spread for net debit. Directional defined risk on index options.

Delta estimates how much an option price moves per ₹1 move in the underlying. Hedging, directional bias, and Nifty weekly contract notes.

Delta neutral portfolio has net delta near zero. Hedging concept for options books.

Expiration is contract end date. Pin risk and assignment on NSE F&O.

Expiry day trading is active F&O trading on contract expiry session. Learn Nifty weekly expiry dynamics, gamma risk, and journal separation from core strategies.

Funding rate balances perpetual futures vs spot. Crypto-native; some global products — context for Indian traders.

Futures are leveraged agreements to buy/sell at expiry. Nifty lot 75, Bank Nifty lot 30 — margin and roll discipline.

Gamma measures how fast delta changes. Why expiry week on Bank Nifty options feels fast, and risk journaling.

Gamma squeeze is accelerated move as dealers hedge gamma. Meme and high-short names globally; context for volatility spikes.

Greeks measure option sensitivities. Delta, gamma, theta, vega on Nifty books.

Hedging offsets risk with opposing positions. Index puts vs stock portfolios on NSE — tag hedge ratio in TradeLyser.

Implied volatility is the market’s forecast baked into option prices. IV rank, crush after events, and NSE weekly options.

ITM options have intrinsic value. Higher delta, more premium on NSE options.

Index futures are cash-settled contracts on Nifty 50 and Bank Nifty. Learn lot sizes, margin, liquidity, and how to journal index futures separately from stock F&O.

Intrinsic value is in-the-money amount of option. Separates real vs time premium.

Iron butterfly sells ATM straddle with OTM wings. Defined-risk short vol on NSE.

Iron condor sells OTM put and call spreads. Range-bound Nifty weeklies — max loss and adjustment rules in journal.

IV crush drops implied vol after events. Short vol risk after RBI, budget, results.

LEAPS are long-dated options (typically 12+ months). Stock swing alternative on NSE where listed.

Margin is collateral required for F&O positions on Indian brokers. SPAN, peak margin, and journal stress tests.

Mark to market (MTM) is daily P&L on open F&O positions at closing price. Learn how NSE MTM affects margin, psychology, and journal tracking for Nifty and stock futures.

Max pain strike is where option writers face min payout at expiry. Context on Nifty weekly expiry.

Naked option is unhedged short option. Margin and tail risk on Indian F&O.

Open interest counts outstanding contracts on NSE F&O. OI changes with price for trend vs short-covering reads.

Open interest change shows new positions versus closures in F&O. Learn to read OI with price on Nifty and Bank Nifty for journal-tagged context.

An option chain lists strikes, premiums, OI, and volume for calls and puts. How Indian traders use Nifty/Bank Nifty chains in planning and journals.

Options flow tracks large or unusual option trades. Context for Nifty — not a standalone signal.

OTM options are pure extrinsic. Lottery tickets vs cheap hedges on Bank Nifty.

Perpetual futures have no expiry — crypto/global. Contrast with NSE monthly expiry futures.

Physical settlement delivers the underlying stock when F&O contracts expire in-the-money. Learn NSE rules, risks for short options, and why retail traders usually close before expiry.

Premium is price paid for option. Cost basis for P&L on NSE options books.

Protective put hedges long stock with long put. Overnight risk on NSE holdings.

A put option gives the right to sell the underlying at the strike. Hedges, bearish trades, and cash-settled index puts.

Put/call ratio compares put to call activity. Sentiment context on Nifty — journal when it influenced your bias.

Rollover moves F&O positions to the next expiry contract. Nifty/Bank Nifty monthly rollover habits and cost logging.

Settlement is final obligation exchange on F&O expiry. Physical vs cash per NSE rules.

SPAN margin is the risk-based margin NSE uses for F&O positions. Learn how SPAN is calculated, how it differs from peak margin, and how to plan capital on Nifty and Bank Nifty books.

Straddle buys/sells ATM call and put. Volatility play around Nifty events.

Strangle uses OTM call and put. Cheaper vol bet than straddle on index weeklies.

Strike price is the fixed level in an options contract. ATM/ITM/OTM selection and liquidity on Nifty weekly chains.

Synthetic replicates stock with options/futures combo. Long synth with call+put short.

Theta is time decay — how much option premium erodes per day. Premium sellers vs buyers in Indian weekly series.

Theta decay curve shows how time value erodes. Non-linear acceleration into Nifty weekly expiry.

Time value is non-intrinsic option premium. Theta decay target on long options.

Vega measures sensitivity to implied volatility. Event weeks, India VIX spikes, and premium seller journals.

Vertical spread uses same expiry different strikes. Defined risk directional on Nifty options.

Weekly options expire each week on indices. Fast theta on Bank Nifty weeklies.