Trading Jargon

Before you dive into the trading world, you might want to get yourself familiarized with some of the common terms that explains what you are buying and how it affects your profits. They may seem puzzling at first but once you grasp the concept, it's easy peasy!

The first you will encounter is Strike Price.
This is the price the Option is bought or sold at. The Strike Price is dependent on the Stock Price. Say Apple's stock at this moment is 257.86, the Strike prices listed will be something like:

AAPL Jun 250 Call     AAPL Jun 250 Put
AAPL Jun 255 Call     AAPL Jun 255 Put
AAPL Jun 260 Call     AAPL Jun 260 Put

Notice the prices are at $5 increments. This applies to most stocks.
The Strike price also helps to determine if the stock is In-the-Money, At-the-Money or Out-the-Money.

In-the-Money
When an Option is said to be ITM, it refers to Strike prices below for Call Options and Strike prices above for Put Options. ITM also means that this Option has Intrinsic Value. Take the Call Option for example, buying an ITM call for APPL would be the strike price of 255 or 250. Of course the higher the intrinsic value, the higher the price of the Option. Say we bought APPL Jun 250 Call, if you were to exercise the Option (buy the stock) immediately, you'd get it $7 below the market rate, so selling the stock immediately gives you a $7 profit per stock.


At-the-Money
An ATM Option means that the Strike Price is the same as the market price. But because this is seldom the case, this term usually refers to the Strike Price nearest to the Stock Price. Eg. Stock Price: 250.25 ATM Strike: 250

Out-the-Money
OTM is the exact opposite of ITM. It refers to Strike prices above for Call Options and Strike prices below for Put Options. Take the same Call Option example into perspective. If 255 Call and 250 Call is said to be ATM, an OTM Option would be 250 Put and 255 Put.
How about 260 Call & 260 Put? Which is ITM, which is OTM?
Answer: OTM: 260 Call / ITM: 260 Put


Also note that an OTM Option has no Intrinsic Value, thus it is cheaper than ITM and ATM Options because it only has Time Value.

Notice the Month is included when purchasing the Option. This month states how long till the Option expires. All Options listed in the US Stock Market expire on the third Friday of the Month. So AAPL JUN 260 PUT will expire on the third Friday of June.

The Smart Traders Mentorship Program teaches all these basics so literally any level of trader (even absolute beginners) are able to follow.