Options & Greeks Glossary
Every term you need to understand the Option Greeks and Indian options trading — defined in plain English, answer-first, with links to the full explainers. 40 terms.
What is this? A plain-English glossary of 40 options and Option Greeks terms for Indian (Nifty, Bank Nifty) traders — from Delta and implied volatility to IV crush, moneyness and delta hedging.
0
0DTE Strategy & hedging
0DTE means zero days to expiry — options traded on their final day, when only hours of life remain. On Nifty and Bank Nifty expiry days these options have extremely high Gamma and rapid Theta decay, so premiums can swing violently on small index moves. They attract aggressive intraday traders chasing large percentage moves, but the same Gamma makes naked selling exceptionally dangerous into the close. 0DTE trading is essentially a bet on intraday direction and pin behaviour, where max pain and OI walls often come into play. also: Zero days to expiry, Expiry-day options
A
Assignment Basics
Assignment is the process by which an option seller is obligated to fulfil the contract when the buyer exercises — delivering or receiving the underlying, or settling in cash. For European-style Indian index options like Nifty and Bank Nifty, assignment can only happen at expiry and is settled in cash against the final settlement value, so there is no early-assignment risk. Indian stock options, however, are physically settled, meaning an ITM seller at expiry must deliver or take delivery of shares. Traders square off ITM stock-option positions before expiry to avoid unwanted physical delivery. also: Exercise assignment
At-the-Money (ATM) Basics
An option is at-the-money when its strike is closest to the current spot price. With Nifty near 24,500, the 24,500 CE and PE are the ATM options. ATM options have Delta near ±0.50, the highest Gamma, the highest Theta, and the most time value, making them the most sensitive to movement, time and volatility. They are the workhorse strikes for straddles, and their premiums decay fastest into expiry. also: ATM
B
Bank Nifty India & market
Bank Nifty is the NSE index of the largest Indian banking stocks, known for higher volatility and larger point swings than Nifty, making it a favourite for aggressive options traders. Its options are European style and cash-settled, with strikes at 100-point intervals and a revised lot size (35 as of the latest SEBI/NSE update). Because banks are rate- and news-sensitive, Bank Nifty carries pronounced downside skew and can move sharply on RBI policy and financial results. Its bigger moves mean bigger Gamma risk on expiry-day short positions. also: Nifty Bank, BankNifty
Black-Scholes Model Pricing
The Black-Scholes model is the foundational mathematical formula for pricing European options from five inputs: spot price, strike, time to expiry, risk-free interest rate and volatility. It produces a theoretical fair value and is the source of the standard Option Greeks, which are its partial derivatives. Because Indian index options are European style and cash-settled, Black-Scholes fits them well and underpins most Greek calculators traders use. Its key limitation is assuming constant volatility, which is why real markets show skew and smile. also: Black-Scholes-Merton, BSM
C
Call Option Basics
A call option gives the buyer the right to buy the underlying at the strike price before expiry, profiting when the underlying rises. On the NSE, a Nifty 24,500 CE gains value as Nifty climbs above 24,500 plus the premium paid. Buyers of calls have positive Delta and limited risk (the premium); sellers have negative Delta and, if naked, unlimited risk. Indian index calls are cash-settled at expiry against the settlement value. also: CE, Call
D
Delta Hedging Strategy & hedging
Delta hedging is the practice of offsetting an option position's directional exposure by taking an opposing position in the underlying or in other options, so the net Delta approaches zero. A trader short a Nifty call with Delta 0.50 per lot can buy Nifty futures to neutralise the directional risk, leaving the trade dependent on Theta and volatility instead of price. Because Gamma and Charm keep changing Delta, the hedge must be rebalanced as the market moves and time passes. It is the core technique that lets desks isolate and trade volatility. also: Delta neutral hedging
Delta Neutral Strategy & hedging
A delta-neutral position has a net Delta of approximately zero, meaning small moves in the underlying produce little immediate profit or loss. Traders build delta-neutral books — such as short straddles or straddles hedged with futures — to bet on time decay or volatility rather than direction. The neutrality is only instantaneous: Gamma makes Delta drift with every move and Charm shifts it with time, so the position needs re-hedging. On expiry day, high Gamma can knock a Nifty delta-neutral book off balance within minutes. also: Market neutral
E
European Option Basics
A European option can only be exercised at expiry, not before — in contrast to American options, which allow exercise any time. All NSE index options, including Nifty, Bank Nifty and FinNifty, are European style and cash-settled, so holders simply receive the intrinsic value at expiry. This removes early-assignment risk for sellers and makes the Black-Scholes model directly applicable for pricing. A trader can still close a European option any time by selling it in the market; only exercise is restricted to expiry. also: European style
Expiry Basics
Expiry is the date on which an option contract ceases to exist and is settled at its intrinsic value. NSE index options expire weekly and monthly; as of 2025 Nifty weeklies expire on Thursday and Bank Nifty has moved to monthly-only expiry, with settlement based on a spot average in the final half hour. As expiry nears, Theta decay and Gamma both accelerate, making expiry-day at-the-money options highly volatile. Indian index options are European style, so they can only be exercised at expiry. also: Expiration, Expiry day
Extrinsic (Time) Value Pricing
Extrinsic value is the part of an option's premium above its intrinsic value — what the buyer pays for the possibility of a favourable move before expiry. It equals premium minus intrinsic value and is driven mainly by time to expiry and implied volatility. With Nifty at 24,650, a 24,500 CE trading at ₹200 has ₹150 of intrinsic value and ₹50 of extrinsic value. Time value is highest for at-the-money options and decays to zero by expiry, a process measured by Theta. also: Time value, Time premium
F
FinNifty India & market
FinNifty is the NSE's Nifty Financial Services index, covering banks, NBFCs, insurers and other financial firms, and is a popular options underlying alongside Nifty and Bank Nifty. Its options are European style and cash-settled, giving traders another liquid index to express financial-sector and volatility views. FinNifty is more concentrated in large financials than the broader Nifty, so it reacts strongly to banking and rate news. Lot sizes and expiry schedules are set by the NSE and revised periodically in line with SEBI norms. also: Nifty Financial Services, Fin Nifty
G
Gamma Scalping Strategy & hedging
Gamma scalping is a strategy where a trader holds long options (long Gamma) and repeatedly trades the underlying against the option's changing Delta, buying dips and selling rallies to harvest movement. As Nifty moves, Gamma shifts the position's Delta, and re-hedging back to neutral locks in small profits from the swings. The cost of this favourable curvature is Theta — the daily time decay paid to stay long options. Gamma scalping is most profitable when realised volatility exceeds the implied volatility paid for the options. also: Scalping Gamma
Gamma Squeeze Strategy & hedging
A gamma squeeze is a self-reinforcing price surge that occurs when heavy call buying forces option market-makers, who are short those calls, to buy the underlying to stay Delta-hedged. As price rises, the calls' Delta increases (via Gamma), forcing yet more buying, which pushes price higher still in a feedback loop. It is more commonly discussed in single stocks with concentrated option activity than in deep, liquid indices like Nifty. The squeeze unwinds — sometimes violently — once the buying pressure fades or the options expire.
H
Hedging Strategy & hedging
Hedging is taking an offsetting position to reduce the risk of an existing exposure, sacrificing some profit for protection. A common Indian example is buying Nifty puts to protect a long equity portfolio against a market fall, or a call seller buying a further-OTM call to cap tail risk (a spread). Options are ideal hedging tools because their cost is known and their protection is defined. Hedging can target direction (Delta), volatility (Vega) or event risk, depending on the instrument chosen. also: Hedge
Historical Volatility Volatility
Historical volatility is the actual, realised movement of the underlying over a past period, calculated as the annualised standard deviation of its returns. Unlike implied volatility, which is forward-looking and priced into options, historical volatility looks backward at what already happened. Traders compare the two: when implied volatility sits well above historical, options may be expensive and worth selling; when below, they may be cheap. The gap between the two is the volatility risk premium that option sellers aim to harvest. also: Realised volatility, HV, RV
I
Implied Volatility (IV) Volatility
Implied volatility is the market's forecast of the underlying's future movement, expressed as an annualised percentage and back-solved from the option's traded price using a pricing model. High IV means expensive options and expected big moves; low IV means cheap options and expected calm. IV rises before known events (results, RBI policy, the Union Budget) and collapses after them — the IV crush. Vega measures how much an option's price responds to a change in IV. also: IV, Implied vol
In-the-Money (ITM) Basics
An option is in-the-money when it has intrinsic value — a call whose strike is below spot, or a put whose strike is above spot. With Nifty at 24,650, the 24,500 CE and the 24,800 PE are both ITM. ITM options have higher Delta (approaching ±1 when deep ITM), cost more, and behave more like the underlying. They carry a higher probability of finishing profitable but offer a smaller percentage payoff than OTM options. also: ITM
India VIX India & market
India VIX is the NSE's volatility index, measuring the market's expectation of Nifty volatility over the next 30 days from near-month Nifty option prices. Quoted as an annualised percentage, a reading of 12 signals calm while 20-plus signals fear, which is why it is called the fear gauge. It typically spikes during selloffs and around major events like elections or the Budget, and falls as uncertainty resolves. India VIX rising alongside falling Nifty is the classic signature of downside volatility skew. also: VIX, Fear index
Intrinsic Value Pricing
Intrinsic value is the amount by which an option is in-the-money — the immediate exercise value if expiry were now. For a call it is spot minus strike (floored at zero); for a put it is strike minus spot (floored at zero). With Nifty at 24,650, a 24,500 CE has ₹150 of intrinsic value, while any OTM or ATM option has zero intrinsic value. At expiry an option is worth only its intrinsic value, as all time value has decayed away. also: Real value
IV Crush Volatility
IV crush is the sharp collapse in implied volatility immediately after a known event, causing option premiums to fall rapidly even if the underlying moves. Before results, RBI policy or the Budget, IV inflates as traders price in uncertainty; once the event passes, that uncertainty vanishes and IV drops instantly. A trader who buys a Nifty straddle before the Budget can be right about a big move yet lose, because the Vega loss from the crush swamps the Delta gain. Sellers, conversely, harvest the crush by selling rich pre-event premium. also: Volatility crush, Vol crush
L
Lot Size India & market
Lot size is the fixed number of underlying units in one options contract; Indian index and stock options trade only in whole lots. The Nifty lot size is 75 and Bank Nifty is 35 (revised by NSE/SEBI over time), so a single premium quote must be multiplied by the lot size to get the rupee cost. A Nifty CE at ₹100 therefore costs ₹100 × 75 = ₹7,500 per lot. Lot size directly scales your notional exposure, margin and per-point P&L. also: Contract size, Market lot
M
Margin (SPAN & Exposure) India & market
Margin is the capital an option seller must deposit with the broker to cover potential losses, since sellers carry open-ended risk. In India it has two parts: SPAN margin, computed by the exchange's risk model to cover worst-case single-day moves, and Exposure margin, an additional buffer on top. Option buyers pay only the premium and post no margin, while sellers of a Nifty option may need well over a lakh of rupees per lot. Margins rise with volatility, so a India VIX spike can trigger margin calls on short positions. also: SPAN margin, Exposure margin
Max Pain Market data
Max pain is the strike price at which the largest rupee value of options would expire worthless, causing maximum loss to option buyers as a group. The theory holds that, because option sellers are often larger and better-capitalised, the underlying tends to gravitate toward this strike near expiry. Indian traders compute the Nifty and Bank Nifty max pain from the option chain's open interest to guess a likely expiry-day pinning level. It is a rough guide, not a law — strong trends and news routinely override it. also: Max pain point, Pin strike
Moneyness Basics
Moneyness describes the relationship between an option's strike and the underlying's spot price, classifying it as in-, at-, or out-of-the-money. It determines how much of the premium is intrinsic versus time value and shapes the option's Delta, Gamma and Theta profile. Traders use moneyness to select strikes: deep ITM for high Delta exposure, ATM for maximum time value and sensitivity, OTM for cheap, high-leverage bets. Moneyness shifts continuously as Nifty moves through the option's life.
N
NIFTY India & market
NIFTY is the National Stock Exchange's flagship index of the 50 largest, most liquid Indian companies, and the underlying for India's most-traded index options. Its options have a lot size of 75, strikes at 50-point intervals, and weekly plus monthly European-style, cash-settled expiries. Nifty options are the benchmark for Indian retail and institutional derivatives activity, with India VIX derived from their prices. Their deep liquidity makes them the default instrument for directional bets, hedging and volatility strategies. also: Nifty 50, Nifty
Notional Value India & market
Notional value is the total value of the underlying controlled by an options contract, calculated as spot price × lot size. With Nifty at 24,500 and a lot size of 75, one contract has a notional value of ₹15,00,000, even though the premium paid may be only a few thousand rupees. This gap between small premium and large notional is what creates options' leverage — and the outsized risk for sellers. Traders use notional value to understand their true market exposure, not just the cash outlay. also: Contract value, Notional exposure
O
Open Interest (OI) Market data
Open interest is the total number of outstanding, not-yet-closed option contracts at a given strike, and is a key gauge of where positions and liquidity are concentrated. Unlike volume, which counts all trades in a day, OI reflects live positions carried forward. Indian traders watch OI build-up at Nifty and Bank Nifty strikes to infer support and resistance: heavy call OI often marks resistance, heavy put OI marks support. Rising OI with rising price suggests fresh longs, while rising OI with falling price suggests fresh shorts. also: OI
Option Basics
An option is a contract giving its buyer the right, but not the obligation, to buy or sell an underlying asset at a fixed strike price on or before expiry, in exchange for a premium paid to the seller. In India, index options like Nifty and Bank Nifty are cash-settled and traded in fixed lots (Nifty lot size 75). The buyer's risk is limited to the premium paid, while the seller's risk can be far larger. Options come in two types: calls (right to buy) and puts (right to sell). also: Options contract
Option Greeks Greeks
The Option Greeks are risk measures that quantify how an option's price responds to changes in the underlying, time, volatility and interest rates. The primary Greeks are Delta (price sensitivity), Gamma (Delta's sensitivity), Theta (time decay), Vega (volatility sensitivity) and Rho (rate sensitivity), with second-order Greeks like Vanna, Charm and Vomma refining the picture. They are the partial derivatives of an option-pricing model such as Black-Scholes. Professional Indian option traders manage positions by their net Greeks rather than by rupee price alone. also: Greeks
Out-of-the-Money (OTM) Basics
An option is out-of-the-money when it has no intrinsic value — a call whose strike is above spot, or a put whose strike is below spot. With Nifty at 24,500, the 24,700 CE and the 24,300 PE are OTM and made up entirely of time value. OTM options are cheap, have low Delta, and offer large percentage payoffs if the underlying moves their way, but a low probability of finishing in-the-money. Premium sellers commonly sell OTM strikes to collect Theta with a high win rate. also: OTM
P
Put Option Basics
A put option gives the buyer the right to sell the underlying at the strike price before expiry, profiting when the underlying falls. A Nifty 24,500 PE gains value as Nifty drops below 24,500 minus the premium paid, making puts the standard tool for hedging a long portfolio. Put buyers have negative Delta and limited risk; put sellers have positive Delta and collect premium. Indian index puts carry higher implied volatility than equidistant calls due to downside skew. also: PE, Put
Put-Call Ratio (PCR) Market data
The put-call ratio is the ratio of open interest (or volume) in puts versus calls, used as a sentiment indicator. A PCR above 1 means more puts than calls are open, often read as bearish positioning or, contrarily, as a sign of oversold fear; below 1 suggests bullish or complacent positioning. On the NSE, traders track the Nifty and Bank Nifty PCR through the day to gauge crowd sentiment. Like all sentiment tools it is best used as a contrarian and confirming signal rather than a standalone trigger. also: PCR
S
Strike Price Basics
The strike price is the fixed price at which an option holder can buy (call) or sell (put) the underlying if exercised. NSE lists Nifty strikes at 50-point intervals and Bank Nifty at 100-point intervals around the spot, so a trader picks a strike based on their view and desired moneyness. The relationship between spot and strike determines whether an option is in-, at-, or out-of-the-money. Strike selection, often guided by Delta, is a core decision in every options trade. also: Exercise price, Strike
T
Theta Decay Greeks
Theta decay is the loss of an option's value with each passing day, purely from the shrinking time left for a favourable move. A Theta of −8 means the option loses about ₹8 per share daily if nothing else changes. Decay is slow far from expiry and accelerates sharply in the final sessions, which is why buyers of Nifty weekly options are racing the clock while sellers harvest the bleed. Theta runs over weekends and NSE holidays too, so sellers often like holding premium across a closed Friday-to-Monday gap. also: Time decay, Theta bleed
Time Decay Greeks
Time decay is the erosion of an option's time (extrinsic) value as expiry approaches, leaving only intrinsic value at settlement. It is quantified by the Greek Theta and is the option buyer's constant headwind and the seller's steady income. Because time value decays roughly with the square root of time remaining, a monthly Nifty option barely loses value in its first week but can shed a third of its remaining premium in the last three days. Understanding time decay is essential to choosing between weekly and monthly options. also: Theta decay
V
Volatility Skew Volatility
Volatility skew is the pattern where options at different strikes trade at different implied volatilities, typically with downside puts priced at higher IV than equidistant calls. In Indian index options this skew is pronounced because crashes happen faster than rallies, so protection against falls is in constant demand. Skew is why a Nifty 24,000 PE can carry a higher IV than a 25,000 CE with the same distance from spot. It drives cross-Greeks like Vanna and explains why Delta-hedged short-put books misbehave in a selloff. also: Skew, Vertical skew
Volatility Smile Volatility
The volatility smile is a curve where both out-of-the-money calls and out-of-the-money puts trade at higher implied volatility than at-the-money options, forming a U or smile shape when IV is plotted against strike. It reflects the market pricing in fatter tails — larger-than-normal moves in either direction — than a simple model assumes. In Indian equity indices the curve is usually a lopsided smirk rather than a symmetric smile, tilted toward expensive downside puts. The smile is the visible evidence that markets do not price volatility as a single constant number. also: Smile
Volatility Trading Volatility
Volatility trading is taking positions to profit from changes in implied or realised volatility rather than from the direction of the underlying. Traders buy options (long Vega) when they expect volatility to rise and sell them (short Vega) when they expect it to fall, often using straddles, strangles, calendars and Iron Condors. In India this centres on India VIX levels, IV rank, and event catalysts where IV crush is predictable. Success depends on aligning the position's Vega and Gamma with a well-reasoned view on how volatility will move. also: Vol trading
Last reviewed 7 July 2026. Educational content only — not investment advice.