Options Selling Glossary: Terms Every Premium Seller Should Know

IV Rank (IVR) — A percentile score showing where current implied volatility sits relative to its past range—often the last 52 weeks on equity options. An IVR of 80 means today's IV is higher than roughly 80% of readings in that window, not that the stock will move 80% more. Options sellers typically look for IVR above 30–50 before opening new short premium, since elevated IV usually means richer credits and more statistical edge for the seller—if your thesis and sizing still make sense. IVR is not the same as raw IV: a stock can have high IV but low rank if volatility has been extreme for months. Full IV rank guide.

Implied volatility (IV) — The market's consensus forecast of future movement, reverse-engineered from option prices. When IV rises, premiums tend to expand even if the stock price is flat—helpful for sellers opening new trades. IV is forward-looking and event-sensitive: earnings, FDA dates, and macro shocks can spike IV overnight. Track both level and rank; compare to your own journal of credits collected at different IV regimes. Investopedia: IV.

Delta — Measures how much an option's price tends to change for a $1 move in the underlying, holding other inputs constant. A short put near the money might show delta around −0.30 (30 deltas per contract), meaning roughly stock-like exposure until expiration. Premium sellers use delta to sanity-check direction: selling puts adds positive delta (bullish tilt); covered calls reduce delta on stock you own. Delta accelerates near expiration—gamma territory—so a 'comfortable' OTM strike can behave differently in the final week. Greeks explained · Investopedia: delta.

Theta — Time decay: the rate at which extrinsic value bleeds out of an option as calendar days pass. Short options carry positive theta—you generally benefit if the underlying cooperates and IV does not spike against you. Theta is not linear; it accelerates in the last few weeks before expiration. Many sellers target 30–45 DTE entries to balance premium collected against gamma risk later. Theta helps you; it does not guarantee profit. Theta decay for sellers · Investopedia: theta.

Assignment — When the option seller must fulfill the contract—buying shares on a short put or delivering shares on a short call. With American-style equity options, assignment can occur any time the option is in the money, though early exercise is often linked to dividends on calls or deep ITM puts. Assignment is not always a loss: on a cash-secured put at your intended entry, it completes the plan. The risk is assignment at the wrong size, price, or timing relative to your journal rules. Log assignment dates, basis, and whether you rolled first. Assignment explained · Investopedia: assignment.

Wheel strategy — A structured loop: sell cash-secured puts on a stock you are willing to own; if assigned, hold the shares and sell covered calls; if called away, return to cash-secured puts. Premium is collected at each stage when trades work as planned. The wheel is not passive income—it is concentrated single-name risk with defined steps. Capital, dividend dates, and earnings must fit your rules before you start the cycle. Wheel strategy step-by-step.

Cash-secured put (CSP) — A short put with cash set aside to purchase stock if assigned—typically strike × 100 × number of contracts. You collect premium upfront; your obligation is to buy at the strike if the market is below strike at expiration (or if assigned early). CSPs are the entry leg many sellers use for the wheel or for staged stock accumulation. Size them against total account collateral, not just the premium received. Selling puts guide · Investopedia: CSP.

Covered call — A short call backed by 100 long shares per contract. You keep the premium; upside above the strike may be capped if shares are called away. Basis is lowered by premiums collected over time. Covered calls fit income and exit plans on stock you already hold. Watch ex-dividend dates—call holders may exercise early to capture the dividend, removing your shares before you expected. Covered calls explained · Investopedia: covered call.

Credit spread — Sell one option and buy a further OTM option on the same expiration for a net credit. Maximum loss is usually the width between strikes minus credit received—defined risk versus a naked short put. Bull put spreads and bear call spreads are common among sellers who want to cap tail risk. Liquidity on both legs matters; wide markets eat edge. Credit spreads vs. naked puts · Investopedia: credit spread.

Theta decay for sellers explains time value decay in more detail.

Definitions matter when you review losing months. Use this glossary as a map—the in-depth entries target how people actually search; the lists keep scanning fast during a trade.

Educational only—not personal financial advice. Browse the full blog or try Option Journal for collateral, expirations, and imports.