IMPLIED VOLATILITY: The volatility which must be attributed to an underlying price in order to make the theoretical values of an option or a spread equal to its current market price.
IN THE MONEY: An option is in the money when it has intrinsic value. A call is in the money when the market price of the underlying is greater than the option’s exercise price. A put is in the money when the market price of the underlying is lower than the option’s exercise price.
INTRINSIC VALUE: The difference between an in the money option strike price and the
current market price of a share of the underlying security. Also called parity.
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