Glossary
Every metric and term you'll see on the site, in plain English. New to options? Start with the Strategy Playbook.
Performance metrics
Win rate
The share of trades that ended profitable. We show a confidence-adjusted rate (a statistical lower bound) so small samples never read as a misleading 100%.
Expectancy / Avg return
The average profit or loss per trade, as a percent. Positive expectancy means the strategy makes money on average over many trades.
Sharpe ratio
Return earned per unit of risk (volatility). Higher is better — above ~1.0 is good, above ~2.0 is excellent. It rewards consistency, not just big wins.
Max drawdown (Max DD)
The worst peak-to-trough drop in the backtest. It tells you the deepest losing stretch you would have had to sit through.
Profit factor
Gross profit ÷ gross loss. Above 1.0 is profitable; 2.0 means you made twice what you lost.
Sample size (trades)
How many historical trades the stats are based on. More trades = more trustworthy. We require at least 20 before recommending a setup.
Signal & conviction
Signal strength
A 0–100 score of how strongly a ticker currently matches a strategy's ideal setup conditions. Higher = a cleaner fit.
Conviction
Our 8-analyst panel's combined confidence in a trade idea, 0–10. It blends momentum, fundamentals, technicals, options flow, sentiment and macro views.
IV Rank
Where the stock's current implied volatility sits versus its own past year, 0–100. High IV Rank means options are 'expensive' — good for selling premium (puts, spreads, condors).
RSI
Relative Strength Index, 0–100. Above ~70 is overbought (may pull back); below ~30 is oversold (may bounce).
Options basics
Call / Put
A call is the right to BUY 100 shares at the strike; a put is the right to SELL 100 shares at the strike. Selling them collects premium.
Strike price
The price at which an option can be exercised. 'ATM' = at-the-money (strike near the stock price), 'OTM' = out-of-the-money, 'ITM' = in-the-money.
Premium
The price of an option, quoted per share (×100 per contract). Sellers collect it; buyers pay it.
DTE
Days To Expiration — how many days until the option expires. Income strategies often target 30–45 DTE.
Breakeven
The stock price at expiry where the trade makes exactly $0. Beyond it you profit; short of it you lose.
Assignment
When the option you sold is exercised against you — e.g. a cash-secured put assigns you 100 shares at the strike.
Probability of Profit (PoP)
The estimated chance a trade finishes profitable, often approximated from the option's delta.
The Greeks
Delta
How much the option price moves per $1 move in the stock (also a rough probability of finishing in-the-money). 0.30 delta ≈ 30%.
Theta
Time decay — how much value the option loses each day. Premium sellers want positive theta working for them.
Gamma
How fast delta itself changes as the stock moves. High near expiry and at-the-money.
Vega
Sensitivity to implied volatility. Premium sellers benefit when IV falls (negative vega exposure).
Order types
Limit order
Buy/sell only at your set price or better. Use it to control entry price on options.
Stop / stop-loss
An order that triggers once price hits a level, used to cap a loss.
Profit target
A limit order to close at a planned gain — e.g. exit a credit trade at 50–75% of max profit.
OCO (one-cancels-other)
Two orders linked so that when one fills (e.g. the profit target), the other (the stop) auto-cancels.
Educational only — not financial advice. Backtested results are not a guarantee of future performance.