---
name: options-trading-desk
description: "Options trading knowledge for a professional trader's AI agent desk. Calls, puts, Greeks, volatility, assignment and the risk discipline of an options desk. Use when researching, checking, sizing or journaling options work. Educational only: no advice, no return promises, no order placement."
---

# Options: professional trading knowledge for AI agents

## When to use this skill
Load this when helping a trader study, explain, check or journal listed options positions. Educational and analytical only.

## Core concepts
- **Calls and puts.** A call is the right to buy, and a put is the right to sell, the underlying at the strike price until (American) or at (European) expiration. The buyer pays a premium; the seller (writer) takes on the obligation.
- **Contract size.** Standard US equity options cover 100 shares per contract. Adjusted contracts (after splits or special dividends) can deliver something different. Always check the deliverable.
- **Exercise style and settlement.** US single-stock and most ETF options are American-style and physically settled in shares. Major cash-settled index options (for example SPX) are European-style. Confirm per product.
- **Pricing.** Premium = intrinsic value + extrinsic (time) value. Extrinsic value depends on time to expiration, implied volatility (IV), interest rates and dividends.
- **Greeks.** Delta (sensitivity to the underlying, and roughly the hedge ratio), Gamma (rate of change of delta), Theta (time decay per day), Vega (sensitivity to IV), Rho (sensitivity to rates).
- **Implied vs realized volatility.** IV is the market's priced expectation; realized volatility is what actually happens. Many strategies are really a view on that gap.
- **Assignment.** Short American-style options can be assigned at any time before expiration, most often when they're deep in the money or just before an ex-dividend date (short calls).

## Pro vocabulary
ATM/ITM/OTM, moneyness, skew (smile), term structure, IV rank/percentile, vol crush, pin risk, early exercise, the clearinghouse (OCC), open interest, bid-ask width, spread, vertical, calendar, diagonal, straddle, strangle, iron condor, covered call, cash-secured put, defined vs undefined risk, max loss, breakeven, buying power effect.

## How a professional desk thinks
- Every options position is a bundle of exposures: direction (delta), convexity (gamma), time (theta) and volatility (vega). Know which one you're actually trading.
- Max loss is stated first. Undefined-risk short options (naked calls in particular) can lose far more than the premium collected.
- Liquidity is part of the price: wide bid-ask spreads and low open interest are real costs, especially across multiple legs.
- Event risk (earnings, FDA decisions, macro releases) is priced into IV beforehand; IV often falls sharply after the event.
- Expiration week changes behavior: gamma rises, pin risk and assignment become real, and positions should be closed or managed deliberately.

## Key risks and common mistakes
- Selling options for "income" without sizing for tail moves.
- Ignoring early assignment on short calls before ex-dividend dates.
- Letting in-the-money long options expire without a plan. Most are auto-exercised if ITM by a threshold, which can create unintended stock positions.
- Using mid prices in backtests; real fills on multi-leg spreads are often worse.
- Confusing a cheap premium with low risk (far OTM options usually expire worthless).
- Holding short options through after-hours events on the underlying.

## Risk rules the agent applies
1. State max loss, max gain and breakevens for any structure before discussing it, and show the math.
2. Flag undefined-risk exposure explicitly ("UNDEFINED RISK").
3. Flag upcoming earnings and ex-dividend dates within the option's life.
4. Check bid-ask width and open interest; flag illiquid legs.
5. Note assignment and exercise considerations for every short leg.
6. Apply the operator's own position-size and buying-power limits.

## What the agent must never do
- Never recommend a specific trade, strike, expiration or size.
- Never describe a strategy as "safe," "guaranteed" or "income" without stating its risk.
- Never place or manage orders.
- Never imply that unusual options activity reveals informed intent.

## Sources to verify
- OCC, Characteristics and Risks of Standardized Options (the Options Disclosure Document): https://www.theocc.com/company-information/documents-and-archives/options-disclosure-document
- Options Industry Council education: https://www.optionseducation.org
- Cboe product specifications: https://www.cboe.com
- FINRA on options: https://www.finra.org/investors/investing/investment-products/options


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Source: The Agentic Trader (https://theagentictrader.com/skills/options). Last verified 2026-10-14. Educational only. Not financial advice.