A type of corporate action that occurs when one company purchases a majority stake in another company. Acquisitions can be paid for in cash, stock, or a combination of the two. 

After-hours trading refers to the extended trading session that takes place after the official closing of a stock exchange. After-hours trading sessions vary by exchange, but they typically extend for a few hours following the official market closing time.

The term “asset class” refers to the different categories of available investments, such as stocks, bonds or real estate. Within an asset class, the available products generally share common characteristics and behaviors, and are often governed by the same laws and regulations. 

Options assignment refers to the process in which the obligations of an options contract are fulfilled. This happens when the holder of an options contract decides to exercise their rights.

When an option holder decides to exercise, the Options Clearing Corporation (OCC) will randomly assign the exercise notice to one of the option writers.

The Average True Range (ATR) is a technical analysis indicator developed by J. Welles Wilder in order to measure market volatility. The ATR captures the degree of price movement over a given period, providing key insights into market volatility.

Backwardation is a term used to describe the structure of prices in the market across the time horizon, and is most often associated with commodities and futures markets.

In backwardation, the futures price is lower than the expected spot price of the underlying asset at the contract's expiration. That means the futures contract trades at a discount to the spot price.

A bear call spread is a bearish options strategy constructed by selling a call option with a lower strike price (closer to at-the-money) and simultaneously buying a call option with a higher strike price. This spread is initiated for a net credit, as the premium received for selling the lower strike call will be greater than the premium paid for buying the higher strike call.

A "bear market" is typically defined as a period of prolonged decline in stock prices, generally characterized by a downward trend of at least 20% from recent highs. During a bear market, investor sentiment is generally pessimistic, and there’s a prevailing atmosphere of fear, uncertainty, and selling pressure. Bear markets often coincide with worsening economic conditions, such as a slowdown in gross domestic product (GDP), declining corporate earnings, and/or geopolitical instability. These conditions often lead to reduced confidence in financial investments.

A bear put spread is a bearish options strategy constructed by buying a put option with a higher strike price (closer to at-the-money) and simultaneously selling a put option with a lower strike price. This spread is initiated for a net debit, as the premium paid for the higher strike put will be greater than the premium received for selling the lower strike put.

Bearish is a term used to describe a negative or pessimistic outlook on the direction of a particular asset, market, or the overall economy. When someone is bearish, they believe that prices or values are likely to decline, and they anticipate that market conditions will deteriorate.

Bearish candlestick patterns are formations that suggest the price of a security may fall. As such, these patterns are commonly used to identify potential entry points for short positions or to signal the exit of long positions.

Beta measures a security's risk as compared to the market as a whole. For this reason, beta is often referred to as a "market risk" or "systemic risk" measurement.

Bitcoin is the largest crypto by market cap while Ethereum dominates Web3. Polygon is an Ethereum sidechain, while Solana is an Ethereum competitor.

A bond is basically a debt instrument issued by governments, municipalities, or corporations to raise capital. When an investor or trader purchases a bond, they are essentially lending money to the issuer for a predetermined period. In return, the issuer promises to pay back the original amount, known as the principal, along with periodic interest payments, usually at fixed intervals until the bond matures.

A bull call spread is a bullish options strategy constructed by buying a call option with a lower strike price (closer to at-the-money) and simultaneously selling a call option with a higher strike price. This spread is initiated for a net debit, as the premium paid for the lower strike call will be greater than the premium received for selling the higher strike call. 

A "bull market" is typically defined as a period in which prices are rising. A bull market can develop for any asset class, or for a specific underlying asset, but the term is traditionally used to describe the overall stock market. Technically, a bull market occurs when prices rise by at least 20% from a recent low.

A bull put spread is a slightly bullish options strategy that is constructed by selling a put option with a higher strike price (closer to at-the-money) and simultaneously buying a put option with a lower strike price. This spread is initiated for a net credit, because the premium collected from the higher strike put is greater than the premium outlaid for the lower strike put.

Bullish is a term used to describe a positive or optimistic outlook on the direction of a particular asset, market, or the overall economy. When someone is bullish, they believe that prices or values are likely to rise, or that the market will perform well in the near future.

A candlestick pattern is a visual representation of price movement, displayed on a chart as a series of candlesticks. Originating from Japanese rice traders in the 18th century, candlestick patterns have become foundational tools for technical analysis in the financial markets. Investors and traders value candlestick patterns because of their ability to convey complex market data in a simple format, allowing market participants to see at a glance whether the market is bullish or bearish, as well as the relative strength of the associated price movement.

Call options are typically utilized by traders who are bullish on a certain underlying asset, where they think the stock price will rise well above their call strike price by the contract’s expiration. Learn more about call options below.

Learn more about Call Options.

A cash-secured put is an options trading strategy whereby the investor/trader sells a put option contract while simultaneously setting aside enough cash to cover the potential purchase of the underlying asset. This strategy is considered conservative because it involves setting aside a cash reserve to cover the potential purchase of the underlying asset. In that regard, the cash reserve acts as a safety net for leverage, as the trader is required to put up the same amount of capital as the entire risk of 100 shares of stock at the strike price.

The collar options strategy is an advanced options strategy used by investors and traders to manage risk - often in concentrated stock positions. This strategy involves owning the underlying stock, buying a put option for downside protection, and selling a call option to offset the cost of the put. The simultaneous use of these options creates a protective "collar" around the long stock position, ensuring that losses do not exceed a certain level, and that gains, while limited, are still achievable up to a predefined limit.

Commodities, in the context of financial markets, refer to basic physical goods that are standardized and interchangeable with other goods of the same type. These include natural resources or agricultural products such as oil, gold, corn, wheat, natural gas, and copper. Commodities are a crucial part of the global economy as they serve as raw materials for the production of more complex goods and services. In the financial markets, commodities can be traded through futures contracts, stocks, ETFs, options, and other financial instruments.

Contango is a term used to describe the structure of prices in the market across the time horizon, and is most often associated with commodities and futures markets.

In a contango market, the futures price is higher than the expected spot price of the underlying asset at the contract's expiration. That means a futures contract will trade at a premium to the spot price.

Corn futures are a specific type of futures contract, traded on exchanges that facilitate futures trading, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE). Like other futures contracts, corn futures are standardized agreements to buy or sell a specific quantity of corn at a predetermined price on a designated future date.

A covered call is a common strategy that is used to enhance a long stock position. The position limits the profit potential of a long stock position by selling a call option against the shares. This adds no risk to the position and reduces the cost basis of the shares over time.

Day trading is the opening and closing of your trading positions within a short period, typically the same day. Also known as intraday trading, the goal of using this trading style is usually to take small profits which eventually add up to bigger gains over time.

In the trading world, the term “debit spread” refers to any spread in which the trader/investor is required to outlay net premium in order to initiate the position.

That means the total premium of any purchased options will be greater than the total premium of any sold options, thus resulting in a net “debit” to the investor/trader’s account. 

In the context of financial markets, "derivatives" refer to financial contracts whose value is derived from an underlying asset, index, or a set of assets. Unlike equities or bonds, derivatives are not assets themselves but are financial instruments based on the value of other financial assets like stocks, bonds, commodities, currencies, interest rates, or market indices.

Derivatives are often used by investors and traders for the purposes of hedging, but may also be used for speculation and/or arbitrage. Some of the most common forms of derivatives include options, futures and swaps.

A diagonal spread is constructed by purchasing a call/put far out in time, and selling a near term put/call on a further OTM strike to reduce cost basis. The trade has only two legs, but it gives the effect of a long vertical spread in terms of directionality, and a calendar spread in terms of its positive vega.

The list of cryptocurrencies has grown rapidly over the years. Explore the most popular types of cryptos such as Bitcoin, as well as ether and other altcoins. 

Dividends are payments made by a corporation to its shareholders, and they are typically sourced from company profits. The decision to distribute dividends, and the amount to be distributed, are determined by the company’s board of directors. These payments can be issued in several forms—most commonly as cash or additional stock. The existence of a dividend can be indicative of a company’s strong financial position. However, not all companies opt to pay dividends, choosing instead to reinvest their earnings into the business in order to fuel growth and development.

An Exchange-traded fund (ETF) is a type of investment fund that trades on stock exchanges, much like individual stocks. An ETF holds assets such as stocks, bonds, commodities, or a mix of these, and typically is designed to replicate the performance of a specific index, sector, or commodity.

The amount that a stock is predicted to increase or decrease from its current price, based on the current level of implied volatility for binary events.

In the options world, intrinsic and extrinsic value together represent the total value (aka premium) of an option. 

The intrinsic value of an in-the-money (ITM) option at expiration is the difference between strike price and stock price. For expiring out-of-the-money (OTM) options, this value is zero.

Extrinsic is the term used for the value of an option beyond its intrinsic value. Stated differently, extrinsic value is the part of the option premium that is not intrinsic value. 

Extrinsic value is sometimes referred to as “time value” because it reflects the possibility that an option may become ITM before expiration.

Fundamental analysis is a method used to assess the intrinsic value of an asset, such as a stock, by examining related economic, financial, and other qualitative and quantitative factors.

Futures are financial contracts that obligate the buyer to purchase an asset (or the seller to sell an asset), such as a physical commodity or a financial instrument, at a predetermined future date and price.

Gap trading, from the perspective of an investor or trader, is a strategy that capitalizes on price gaps which are identified on the price chart of financial instruments. These gaps occur when the opening price of an asset significantly differs from the previous day's closing price, creating a visible gap on the price chart. 

Gold futures are a specific type of futures contract, traded on exchanges that facilitate futures trading, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE). Like other futures contracts, gold futures are standardized agreements to buy or sell a specific quantity of gold at a predetermined price on a designated future date.

There are a lot of moving parts with options, but luckily, we have the greeks to help us parse the information the market is giving us. At tastylive, we mainly focus on five main greeks - beta, delta, gamma, theta and vega. Each have a different meaning and importance, but understanding them holistically helps us analyze our portfolio and position risk. Greek values in options trading are extremely important, as they allow us to have a mathematical understanding of our positions as well as gauge our true risk.

In the financial markets, the term “hedging” relates to risk management, and refers to a strategic attempt to offset or reduce risk in a position or portfolio. 

A hedge may be established using a wide range of financial instruments, including stocks, stock options, futures, futures options, and other securities. 

When successfully implemented, a hedge can help protect against losses. However, one must be aware that a hedge can also create losses, and potentially offset gains in the position/portfolio that it was intended to protect.

Bitcoin trading refers to the practice of buying and selling bitcoin, the most recognized and valuable cryptocurrency in the digital asset market. As the first widely adopted digital currency, bitcoin has established itself as a key player in the financial world, known for its volatility and potential for high returns. Its price movements are closely watched, as they often set the tone for the broader cryptocurrency market, influencing investor sentiment and market dynamics.

Implied volatility crush (aka volatility crush) refers to a significant decrease in the implied volatility of a particular option, or a group of options. Implied volatility (aka IV) is a measure of the market's expectation of future volatility, which is a critical component in the determination of options prices. 

In-the-money (ITM) is a term used to describe an option that has an intrinsic value greater than zero. The amount by which an option is in-the-money is referred to as its intrinsic value.

In general, the term “moneyness” refers to the relationship between the current price of the underlying asset and the strike price of the option. Moneyness is typically categorized in three different ways, in-the-money (ITM), at-the-money (ATM) or out-of-the-money (OTM).

In the financial markets, an initial public offering (IPO) describes the process by which a privately-held company offers its shares for sale to the general public for the first time. 

When a company “goes public,” it essentially transitions from being privately owned by a select group of investors (e.g. founders, venture capitalists, and private equity firms) to a publicly traded company with shares available for purchase on a stock exchange.

In the options world, intrinsic and extrinsic value represent the total value (aka price or premium) of an option. 

The intrinsic value of an in-the-money (ITM) option at expiration is the difference between the strike price and stock price. For expiring out-of-the-money (OTM) options, this value is zero.

An iron butterfly is an advanced options strategy that involves a combination of four different options contracts. Essentially, an iron butterfly combines two spread strategies—a bull put spread and a bear call spread.

An iron butterfly is a limited risk, limited reward strategy and is designed to have a high probability of earning a small limited profit when the underlying asset is believed to have low volatility.

An iron condor is a directionally neutral, defined risk strategy that profits from the underlying trading in a range, through the expiration of the options contract. In this guide, you’ll learn what makes it valuable and why it’s considered a high probability trading strategy.

Long-term Equity Anticipation Securities (LEAPS) are a type of stock or index option with notably longer expiration dates as compared to standard options. While most traditional options expire within a year, LEAPS options can have expirations that extend up to two or three years from the time they're issued.

Legging a trade refers to the opening or closing of each leg for a non-naked strategy in separate transactions.

Leverage is a financial tool that allows investors and traders to control a larger position with a relatively smaller amount of capital. In the broader financial markets, leverage is often achieved through borrowing, or using financial instruments that amplify potential returns (and risks) relative to the initial investment. In this regard, leverage enables market participants to gain greater exposure to an asset without having to fully fund the position themselves.

Liquidity is how easily an investor can buy or sell an asset without losing much value. The more an asset is traded, the more liquid it becomes.

Margin is the amount of capital required to open a trade. 

Mean reversion is very important to what we do at tastylive. As mean reversion traders, we look to exploit price extremes and volatility because we believe they will revert to their mean over time. Volatility proves to be the one variable that is recognized as being ‘mean reverting’ in many option-pricing models.

Momentum trading, often referred to as "momo" trading, is a strategy that capitalizes on the continuation of existing trends in asset prices. Momentum traders aim to identify securities that have exhibited strong price movements in a particular direction, whether upward or downward, and enter positions to profit from the momentum continuing in the same direction.

In the options universe, the term “moneyness” refers to the relationship between the current price of the underlying asset and the strike price of the option.

As a reminder, the strike price is the price at which the option holder can buy (for a call option) or sell (for a put option) the underlying asset.

Moneyness is typically categorized in three different ways, in-the-money (ITM), at-the-money (ATM) or out-of-the-money (OTM).

Natural gas futures are a specific type of futures contract, and are traded on exchanges that facilitate futures trading, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE). Like other futures contracts, natural gas futures are standardized agreements to buy or sell a specific quantity of natural gas at a predetermined price on a designated future date.

In the financial markets, correlation is a statistical measure that indicates the extent to which the prices of different assets move together. A positive correlation means that the prices of two assets tend to move in the same direction, while a negative correlation means that the prices of two assets tend to move in opposite directions.

Learn more about negative correlation.

In the financial markets, notional value refers to the amount of money controlled by a given financial position. Notional value is commonly cited in derivatives markets, because these instruments allow for considerable leverage. 

An awareness of notional value allows investors and traders to easily differentiate between the cost to enter a given position and the total financial value that is controlled by that position. The cost to enter a position may be referred to as the market value, which is the price that a financial security (such as a derivative) can be bought and sold.

From that perspective, market value refers to the actual value of a securities position, whereas notional value refers to the total financial value controlled by that position. 

Oil futures are a specific type of futures contract, traded on exchanges that facilitate futures trading, such as the Chicago Mercantile Exchange (CME) or the Intercontinental Exchange (ICE). Like other futures contracts, oil futures are standardized agreements to buy or sell a specific quantity of oil at a predetermined price on a designated future date.

Open interest refers to the total number of outstanding option contracts that are currently active and have not been settled or closed. As such, open interest provides insight into the liquidity and activity level of a particular option.

Allocating a minimum of $2,000 to a trading fund. 

The “Greeks” refer to a group of parameters that measure risk in an options position. The Greeks are typically used to help investors and traders risk-manage individual options positions, as well as the overall portfolio.

Options are priced using various mathematical models, with the most widely used being the Black-Scholes model. This model, and others like it, take into account key market data and/or assumptions to determine the price of an option. 

An option is a financial contract whose value is derived from an underlying asset, index, or a set of assets. The value of an option is based on the value of other financial assets like stocks, ETFs, bonds, commodities, currencies, interest rates, or futures. 

Delta is a theoretical concept that estimates an option's value in terms of how much it can change based on a 1$ move up or down in the underlying security.

The term "expiration" refers to the fact that certain trading instruments exist for a finite period of time. At expiration, an option contract will either be converted into 100 long or short shares of the underlying stock, or it will expire worthless.

Options on futures are derivative instruments similar to the options you might buy on a single stock, but instead of the underlying asset being shares of a specific company, the underlying asset is a futures contract.

An option on a futures contract gives the holder the right, but not the obligation, to buy (in the case of a call option) or sell (in the case of a put option) a specific futures contract at a predetermined price (the strike price) on or before a certain date (the expiration date).

"Out-of-the-money" (OTM) is a term used to describe an option that has zero intrinsic value. As such, any and all value in an out-of-the-money (OTM) option is considered extrinsic value.

In general, the term “moneyness” refers to the relationship between the current price of the underlying asset and the strike price of the option. Moneyness is typically categorized in three different ways, in-the-money (ITM), at-the-money (ATM) or out-of-the-money (OTM).

A "poor man's covered put" is a trading strategy that mimics the payoff of a covered put but with a lower capital requirement. This strategy involves using a long-term put option (often a LEAPS option) as a substitute for shorting the underlying stock, and pairing it with a near-term short put option. The short put is intended to generate income from extrinsic value premium.

In the financial markets, correlation is a statistical measure that indicates the extent to which the prices of different assets move together. A positive correlation means that the prices of two assets tend to move in the same direction, while a negative correlation means that the prices of two assets tend to move in opposite directions.

Learn more about Positive Correlation.

Pre-market trading hours refer to the period before the official opening of a financial exchange when trading in certain securities, such as stocks, occurs. These hours typically take place in the early morning, before regular trading hours commence.

Probability of profit (POP) refers to the chance of making at least $0.01 on a trade. This is an interesting metric that is affected by a few different aspects of trading - whether we’re buying options, selling options, or if we’re reducing cost basis of stock we are long or short.

Put options reflect a trader’s bearish assumption of the market or underlying – the trader thinks that a certain product’s price will fall well below their put strike price by the contract’s expiration.

Learn more about Put Options.

“Quadruple witching” is a unique phenomenon in financial markets where four types of derivative instruments expire simultaneously. These instruments include stock index futures, stock index options, stock options, and single-stock futures. Occurring on the third Friday of March, June, September, and December each year, this simultaneous expiration can lead to a significant increase in trading volume and heightened volatility as traders and investors close out expiring positions and open new ones.

The impact of quadruple witching is often felt most acutely in the final hour of trading, known as the "witching hour," when rapid price movements can occur. 

A term referring to the current bid/ask price of an asset in the marketplace.

Risk Management refers to the strategic risk that we take when trading options. This covers everything from our trade size, to our strike selection, product choice and type of strategy. We are able to control all of these factors in order to increase our probability of success and avoid large drawdowns in our account.

A type of arbitrage in which a profit is theoretically guaranteed. May also be referred to as "Risk-Free Arbitrage."

Rolling a trade is one way to manage a winning or losing position.

The SPDR S&P 500 (SPY) is an Exchange Traded Fund (ETF) that tracks the performance of one of the most popular US indices, the Standard & Poor's 500 (S&P 500).

Scalp trading in the financial markets refers to a short-term trading strategy where investors/traders aim to profit from small price movements in assets, such as stocks, currencies, or cryptocurrencies. Scalp traders often make numerous quick trades throughout the day, holding positions for as little as a few seconds to a few minutes, or sometimes even longer. 

While traditional investing advocates for fewer occurrences and values the buy and hold strategy, we at tastylive take a statistical approach to trading. We believe in putting on many small high probability trades to increase our probability of success.

The term "stock market" is a general term used to collectively refer to all markets and exchanges where the shares of publicly-traded companies are issued and traded. 

One could refer to the worldwide stock market, including all exchanges and markets on the planet, or to a stock market in a specific country, or region of the world. For example, the U.S. stock market, or the Southeast Asian stock market. 

A stock split is a corporate action that involves dividing a company's existing shares into multiple new shares to increase the total number of shares outstanding. This is technically known as a "forward stock split." While the number of shares increases, the total value of the shares remains the same, meaning the market capitalization of the company is unchanged. For instance, in a 2-for-1 stock split, each existing share is split into two shares, and the price per share is halved. 

A stock represents ownership in a company. When you own a stock, you hold a share or a portion of that company's ownership. Publicly traded stocks are bought and sold on stock exchanges, allowing investors to become shareholders and potentially benefit from a company's profits and growth.

A straddle is an options strategy that involves simultaneously purchasing or selling both a call option and a put option with the same strike price and expiration date for a particular underlying asset. If the call and put are both purchased, the associated trade structure is called a “long straddle.” But if the call and put are both purchased, the associated trade structure is called a “short straddle.”

In options trading, the strike price, also known as the exercise price, is a predetermined price at which the holder of an option has the right, but not the obligation, to buy or sell the underlying asset. This asset could be a stock, commodity, index, or currency, depending on the type of option.

The strike price is a key element of an options contract because it serves as a reference point for exercising a given option. As such, the strike price may also be defined as the price at which an option can be exercised by its owner (aka holder).

Technical analysis refers to the practice of using historical data to try and forecast future movement (i.e. price direction) in the price of a security. Using historical price and volume data, technical analysts seek to decipher patterns and trends which are then used to forecast future price movement.

Theta is the daily decay of an option’s extrinsic value. This metric is the cloudiest of all, as it assumes implied volatility & price movement are held constant. For this reason, it’s better to think of theta decay from the bigger scheme of things.

Triple witching refers to a specific event that occurs on the third Friday of certain months, typically March, June, September, and December. 

During triple witching events, three different types of financial derivatives contracts—stock options, stock index futures, and stock index options—all expire on the same day. This convergence of multiple expirations can lead to increased trading activity and volatility in the financial markets.

Undefined Risk refers to the risk that is accompanied with naked options and when your possible max loss is unknown on order entry. This normally refers to a naked call as the underlying equity could possibly go up indefinitely. Naked puts also have undefined risk, however we know that an underlying can only go to zero so we can consider this our max loss.

The CBOE Volatility Index (VIX) is a key barometer that investors and traders use to gauge expected volatility in the stock market. The VIX is calculated using front-month options in the S&P 500 index, and therefore reflects the market's perception of risk based on the ever-changing demand for these 30-day options.

The idea that the movement of the /VX give some type of prediction of future market activity. 

The VXX is an exchange traded note (ETN) that tracks the VIX short-term futures. Learn more about how to trade VXX options and when to use it from tastylive!

Learn more about VXX.

One of the Greeks, vega measures the rate of change in an option’s theoretical value given a 1% change in implied volatility.

Learn more about Vega.

A vertical debit spread is a defined risk, directional options trading strategy where we buy an option that we want to increase in value, while selling a similar option type against it to reduce the overall cost and risk of the trade.

“Vertical” in this case just means that the options are in the same expiration cycle.

“Debit” means we are paying for the spread, and we want the overall spread to increase in value. The long option is our asset in a debit spread, and the short option is our cost basis reduction component. 

“Spread” indicates that we have a long and short option component in the same trade, where one offsets the P/L of the other to a degree.

Volatility skew refers to the uneven distribution of implied volatility across different strike prices and expiration dates of options contracts. Implied volatility reflects the market's expectation of future price movements for the underlying asset. The volatility skew therefore illustrates how this expectation varies depending on the option's strike price and time to expiration.