# Glossary

## Overview

**Call Option**: A type of derivative that grants the holder the right but not the obligation to purchase the underlying asset at a specified price at a specified time in the future.

Hook's call options grant the holder to all proceeds above the strike price from the sale of the underlying NFT.

**Put Option**: A type of derivative that grants the holder the right but not the obligation to sell the underlying asset at a specified price at a specified time in the future. Hook does not support put options at the moment.

**Strike Price**: The minimum price of an option for it to be in the money.

**Expiration Date**: The date when the option can be exercised.

**Premium**: The price of an option.

**Breakeven Price**: The price at which the option holder breaks even. Slightly different than strike price = spot price as gas costs must be accounted for.

**American Options**: A type of option that can be exercised on or before its expiration date.

**European Options**: A type of option that only can be exercised on its expiration date.

Hook uses European Options. Holders can sell them on Hook's secondary market to exit their position.

## Order Types

**Bid**: An option offer. The highest will be surfaced in Hook's UI.

**Ask**: An option listing. The lowest will be surfaced in Hook's UI.

**Market Order**: An order type allowing a trader to purchase an option immediately.

**Limit Order**: An order type allowing a trader to purchase an option at a specific price. The order will not be filled immediately.

## Moneyness

**In the Money**: The option is currently profitable because the underlying asset's spot price is higher than the strike price.

**At the Money**: The option is net zero because the underlying asset's spot price is equal to the strike price.

**Out of the Money**: The option is unprofitable because the underlying asset's spot price is lower than the strike price.

## Advanced

**Implied Volatility (IV) **: A forward-looking metric that predicts the future volatility of an option. Options with higher implied volatilities are more likely to expire in the money, meaning they will have higher premiums.

**Delta**: Delta is a metric measuring the price sensitivity of a derivative to a $1 change in its underlying asset. For example, if the price of an apple increases by $1, but the price of an apple derivative only increases by $0.50, then the delta of the apple derivative is 0.50. For options, delta values are positive for calls (between 0 and 1) and negative for puts (between -1 and 0). The value of a delta in percentage terms gives an approximate probability that the option will finish in the money.

Updated 9 months ago