Charm – This is a second order option greek that refers to the change in delta over time. This is also known as “delta decay.” For example, if you buy an at the money call, your delta on that call will be around 50. But as time goes on, that delta will change. If the option is out of the money going into expiration, then you’ll have a delta of 0. If the option is in the money at expiration, you’ll have a delta of 100.
So basically, if an option is in the money the delta will increase over time (charm is positive) and if an option is out of the money the delta will decrease over time (charm is negative).
Magnet Trade – A specific trading strategy where you expect a certain price level to act as a magnet. This trade works especially well if the majority of market participants are anchoring off a certain level. For example if a stock is trading at $97 for the first time ever, it has a very high odds of testing $100 because it’s a whole number and many are watching that level. It can cause market makers and institutional sellers not to be aggressive with their sell orders and the stock will move up to the magnet level before finding balance again.
Reversion – A kind of price action where a stock or market tends to revert to the mean. If you look at a market and it’s trying to breakout but can’t see much follow through, then you’re seeing a high-reversion market.
Roll – This is an option risk management strategy where you close out an option or spread and open a new option or spread with different strikes or months.
For example, if you’re in an iron condor trade and the market is ripping higher, one adjustment strategy is to roll the call spread higher. You would close out your open position and then sell a new spread at higher strikes. This would increase the cost of the trade, but would also increase your odds.
You can also roll winners. If you have a call buy and the stock has seen a strong run, you can roll up the call which will lock in profits on your trade.
Scale In – A trading technique where you assume you’re probably early on a trade and don’t want to commit full size initially. By going in halves or thirds with your position size, it gives you the opportunity to work down to a better cost basis on a trade. The downside is if your trade works great from the start, you will miss additional gains as you didn’t go in full size.
Speed Bump – Refers to the process of buying an option (either call or put) to reduce the risk in an income trade. For example, if you have too much upside risk on an iron condor, you may purchase a call to cut your risk down, which slows down the trade.