Options Trading Cheat Sheet

Core Terminology

Premium

The price you pay to buy an option (or receive when selling). This is the option's cost. For the buyer, it's the maximum amount you can lose.

Strike Price

The price at which you can buy (call) or sell (put) the underlying stock. Also called the exercise price.

Expiration

The date the option contract expires. After this date, the option is worthless. Options lose value faster as expiration approaches (time decay).

Contract

One options contract controls 100 shares. A $5 premium means the contract costs $500 total ($5 x 100 shares).

Moneyness

Describes the relationship between the stock price and the strike price

ITM In the Money

The option has intrinsic value right now.

Call: Stock price > Strike price

Put: Stock price < Strike price

ATM At the Money

Stock price is equal to (or very near) the strike price.

Call: Stock price = Strike price

Put: Stock price = Strike price

OTM Out of the Money

The option has no intrinsic value. Only time value remains.

Call: Stock price < Strike price

Put: Stock price > Strike price

Order Types

The four basic actions you can take with an options contract

BTO Buy to Open

Open a new long position by buying an option. You pay the premium and gain a right. This is how you go long a call or put.

STO Sell to Open

Open a new short position by selling an option. You collect the premium but take on an obligation. This is how you go short a call or put.

BTC Buy to Close

Close an existing short position by buying the option back. Used to exit a short call or short put before expiration.

STC Sell to Close

Close an existing long position by selling the option. Used to exit a long call or long put and collect any remaining value.

Opening: BTO (buy) or STO (sell) to enter a new trade. Closing: STC (sell) or BTC (buy) to exit an existing trade.

Quick Quiz

Test your knowledge of moneyness and order types

Strategy Matrix

Which strategy to use based on your market outlook

Outlook	Buy Call (Long Call)	Sell Call (Short Call)	Buy Put (Long Put)	Sell Put (Short Put)
Bullish You think the stock will go up	✓	✗	✗	✓
Bearish You think the stock will go down	✗	✓	✓	✗
Neutral You think the stock will stay flat	✗	✓	✗	✓

Bullish - Stock going up

✓ Buy Call

✗ Sell Call

✗ Buy Put

✓ Sell Put

Bearish - Stock going down

✗ Buy Call

✓ Sell Call

✓ Buy Put

✗ Sell Put

Neutral - Stock staying flat