Key words
This page explains the words you will see in the app. Each one has a small example. All examples use NIFTY, with the index at 24,000.
The market
Section titled “The market”Index (underlying) : The market index your options are based on: NIFTY, BANKNIFTY, FINNIFTY, MIDCPNIFTY or SENSEX. In the app this is called the Underlying.
Spot : The index’s current price. Example: NIFTY spot is 24,000.
India VIX : A number that shows how much the market expects prices to move. A higher VIX means bigger expected moves and usually costlier options.
Options
Section titled “Options”Option : A contract on the index. It has a type (call or put), a strike and an expiry date.
Call (CE) and put (PE) : A call (CE) gains value when the index rises. A put (PE) gains value when the index falls.
Strike : The price written into the option. Strikes come in fixed steps: 50 points for NIFTY and FINNIFTY, 100 for BANKNIFTY and SENSEX, and 25 for MIDCPNIFTY.
ATM, ITM and OTM : ATM (at the money) is the strike closest to spot. OTM (out of the money) strikes are further away on the side where the option has no value yet. ITM (in the money) strikes are on the other side.
| With NIFTY at 24,000 | Call (CE) | Put (PE) |
|---|---|---|
| ATM | 24,000 | 24,000 |
| OTM 2 (two steps out) | 24,100 | 23,900 |
| ITM 1 (one step in) | 23,950 | 24,050 |
Premium : The price of one unit of an option. Example: the 24,000 CE costs ₹100.
Expiry : The last day an option trades. Each index has weekly and/or monthly expiries.
DTE (days to expiry) : How many calendar days are left until expiry. 0 DTE is the expiry day itself. Example: if an option expires on a Tuesday, it is 1 DTE on Monday and 4 DTE on the Friday before.
Option market data
Section titled “Option market data”IV (implied volatility) : How much movement the option prices expect, as a yearly percentage. Higher IV means costlier options. Example: NIFTY ATM IV of 12% versus 18%: at 18% the same option costs more.
Open interest (OI) : How many contracts of an option are open right now. It rises when new positions are opened and falls when they are closed.
PCR (put-call ratio) : Put open interest ÷ call open interest. Example: 1.2 means 1.2 put contracts are open for every call contract.
Max pain : The strike at which all the open calls and puts together would be worth the least at expiry.
VWAP : The day’s average price, weighted by how much traded at each price.
Greeks : How an option’s price reacts to change. Delta: points the option moves for a 1-point move in the index (a delta of 0.5 moves about ₹0.50). Gamma: how fast delta changes. Theta: value the option loses per day as time passes. Vega: change in price for a 1-point change in IV.
GEX (gamma exposure) : An estimate of how much option sellers would have to buy or sell to stay hedged as the index moves. Positive GEX tends to calm moves; negative GEX tends to make them bigger.
Gamma flip (ZERO G) : The index level where GEX changes from positive to negative. On one side dealers are long gamma and their hedging tends to calm moves; on the other they are short gamma and it tends to make moves bigger. Example: with the flip at 24,020 and NIFTY at 24,100 on the long-gamma side, a fall through 24,020 turns dealers short gamma.
Positions
Section titled “Positions”Buy and sell : Buy means you pay the premium. The most you can lose is what you paid. Sell means you receive the premium. If the market moves against you, the loss can be much larger than the premium you received.
Lot and quantity : You trade options in lots. One lot is a fixed number of units set by the exchange. Example: in the app’s current settings, 1 NIFTY lot is 65 units.
Points and rupees : Prices and moves are in points. Profit in rupees = points × quantity. Example: you sell 1 lot of the 24,000 CE at ₹100 and buy it back at ₹80. That is 20 points of profit. 20 × 65 units = ₹1,300.
Leg : One option position inside a strategy. A strategy can have several legs.
Straddle and strangle : A straddle is a call and a put at the same strike, for example Sell 24,000 CE + Sell 24,000 PE. A strangle uses different strikes, for example Sell 24,100 CE + Sell 23,900 PE.
Exits and risk
Section titled “Exits and risk”Stop loss (SL) : The point where a losing position is closed to limit the loss.
Target (TP) : The point where a winning position is closed to take the profit.
Square off : Closing every open position at once, for example at the day’s exit time.
Intraday and positional : Intraday closes everything on the same day. Positional lets positions stay open overnight.
P&L and MTM : P&L is profit and loss. MTM (mark to market) is the P&L of positions that are still open, valued at the current price.
Drawdown : How far your total P&L fell from its highest point before it recovered. It shows the worst stretch of losses you would have had to sit through.
Testing and trading
Section titled “Testing and trading”Paper and live : Paper trading uses live prices but only pretends to place orders: nothing reaches your broker. Live trading places real orders through your broker.
Slippage : The difference between the price you expected and the price you actually got. You click to buy at ₹100 and the order fills at ₹100.50: slippage is ₹0.50 a unit, ₹32.50 on one 65-unit lot.
Brokerage and government charges : Brokerage is what your broker charges per order. Government charges are STT, exchange charges, the SEBI fee, stamp duty and GST.
Win rate : In this app, the share of days that ended in profit (days without a trade are left out), not the share of single trades. 20 traded days, 13 of them green: win rate 65%.
Sharpe ratio : Average daily P&L divided by how much it swings from day to day, scaled to a year. Higher means steadier. Above 1 is usually called good. Two strategies both make ₹1,000 a day on average; one swings ±₹500 a day, the other ±₹4,000. The first has the much higher Sharpe.
In-sample and out-of-sample : In-sample dates are the ones a tuning run searched. Out-of-sample dates are kept apart and used only to check the result. Only out-of-sample results show how a setting does on data it has not seen. Tune on January to June (in-sample), then test the winner on July (out-of-sample).
Overfitting : Tuning a strategy so closely to past data that it fits that past by luck and fails on new data. See Tune without fooling yourself.
In the app
Section titled “In the app”Backtest : A replay of your strategy on past one-minute market data. It shows what your rules would have done then, not what will happen next.
Credits : Running a backtest uses credits from your account. Your balance is in the top-right corner of the app (CREDITS). Click TOP UP next to it to add more.