Strike Price or Exercise Price

This is the - guaranteed - price at which the underlying stock (or other asset) can be bought (call option) or sold (put option).

Exercise Price

See Strike Price

Derivative

Financial imstrument whose value is derived from an underlying asset. A stock option's value is based on the value of the underlying stock.

Expiration Date/Expiry

The date after which the option cannot be exercised anymore. For European options it is the date of exercise, for American options it is the last possible date of exercise.

Payoff

The amount you receive from exercising the option.

Call

A call option gives the owner of the option the right to buy an asset at a given price.

Put

A put option gives the owner of the option the right to sell an asset at a given price.

Exercise

The owner of the option exercises his/her right to buy (call option) or sell (put option) for the agreed upon price.

Random Walk

Change of the price of a stock with time due to unpredictable market fluctuations.

Volatility

Measure of the amount of fluctuations of an asset price.

European

A european option can only be exercised at the expiration date.

American

An american option can be exercised at anytime before expiration.