Divergence Secrets

Key Terms in Option Trading

Before going deeper, you must understand some basic terminology:

• Strike Price

The pre-decided price at which you can buy (call) or sell (put) the asset.

• Premium

The price you pay to buy the option contract.

• Expiry

Options have an expiry date—weekly, monthly, or longer.

• Lot Size

You cannot buy individual shares in options; contracts come in fixed lot sizes.

• In-the-Money (ITM)

The option already has intrinsic value.

Call ITM: Market price > Strike price

Put ITM: Market price < Strike price

• Out-of-the-Money (OTM)

The option has no intrinsic value, only time value.

• At-the-Money (ATM)

Strike price ≈ Market price.

Understanding these terms helps you choose the right option for your trade setup.