Reference

Glossary

Plain-language explanations of the market, options and research terms used throughout TradeMight.

Term	Explanation
Adverse slippage	An intentionally unfavorable adjustment to a quoted price used to make simulated fills more conservative.
Ask	The lowest displayed price at which a seller is currently willing to sell.
Backtest	A simulation that applies fixed trading rules to historical data to estimate how they would have behaved.
Base scenario	The primary set of cost and sizing assumptions used for comparison. In Regime Router v0.1 it adds $0.01 of adverse slippage per option leg and caps modeled risk at 0.50% of portfolio equity per trade.
Bid	The highest displayed price at which a buyer is currently willing to buy.
Call debit spread	A bullish, defined-risk options position that buys a call and sells a higher-strike call with the same expiration.
Call calendar	A time spread that sells a nearer-dated call and buys a longer-dated call at the same strike.
Call diagonal	A time-and-strike spread pairing calls with different expirations and strikes.
Cash-secured put	A short put backed by enough modeled cash to purchase the underlying shares at the strike if assigned.
Completed trade	A simulated position that passed every frozen eligibility rule and has the required entry, holding-period, and exit data.
CAGR	Compound annual growth rate: the constant annual rate that would connect the starting and ending portfolio values.
Defined risk	A position whose maximum modeled loss is capped and known when the trade is opened.
Broken-wing butterfly	A one-by-two-by-one option butterfly with unequal wing widths; TradeMight permits it only when the modeled expiration loss is bounded.
Covered call	A short call paired with sufficient underlying shares to cover assignment.
Delta	An estimate of how much an option price may change for a $1 move in its underlying asset, all else equal.
DTE	Days to expiration: the number of calendar days remaining before an option expires.
Executable-side fill	A conservative simulation that buys at the ask and sells at the bid, before additional slippage and fees.
Expected shortfall	The average loss among returns at or beyond a selected tail threshold. Historical expected shortfall describes the sample and does not cap future loss.
Excess return	A strategy's return minus the return of its stated benchmark over the same period.
Holdout	A final historical period kept untouched during design and used only to test whether results generalize.
Half-sized scenario	A robustness test that cuts the maximum modeled risk budget per trade in half while leaving the other base assumptions unchanged.
Implied volatility (IV)	The market's option-price-implied estimate of future variability; it is not a directional forecast.
Iron condor	A range-bound options position combining a put credit spread and a call credit spread; protective wings cap the loss.
Iron butterfly	A defined-risk options position that sells an at-the-money call and put and buys protective wings.
LEAPS	Long-term listed options that generally have more than one year remaining until expiration.
Maximum drawdown	The largest percentage decline from a portfolio peak to a later trough during the measured period.
Multiple-testing control	A predeclared adjustment that raises the evidence threshold when several hypotheses are tested, reducing the chance of promoting a lucky result.
Momentum	A rule based on whether an asset's own past return has been positive or negative over a stated lookback; it is not a guarantee that the trend will continue.
Moving average	The average of a fixed number of completed price observations, recalculated through each decision date.
Volume ratio	The decision session's SPY trading volume divided by its 20-session average through that date. It is observation-only context and does not change a frozen paper signal.
NBBO	National Best Bid and Offer: the highest displayed bid and lowest displayed ask across participating U.S. venues.
Open interest	The number of option contracts reported as open rather than closed or exercised.
Option	A contract providing defined rights or obligations tied to an underlying asset at a strike price and expiration.
Paper trading	Simulated forward trading without real capital or live brokerage orders.
Put debit spread	A bearish, defined-risk options position that buys a put and sells a lower-strike put with the same expiration.
Put credit spread	A short put protected by a lower-strike long put at the same expiration, capping both gain and loss.
Prospective observation	A test recorded only as new market data occurs after the rules are frozen; missed observations cannot later be backfilled and called prospective.
Regime	A rules-based classification of market conditions, such as bullish, bearish, range-bound, or uncertain.
Regime Router v0.1	The first frozen version of a TradeMight strategy that classifies SPY as bullish, bearish, range-bound with relatively rich implied volatility, or uncertain, then selects a matching defined-risk option structure or holds cash. The name identifies the rule set; it is not a performance rating.
Reproducibility	The ability to recreate a research result from the recorded strategy rules, code version, data snapshots, parameters, assumptions, and random seed.
Research record ID	A SHA-256 fingerprint calculated from a complete run manifest. It uniquely identifies an exact research run and changes if its strategy, code, data, parameters, assumptions, or environment changes. It is not a performance number or account identifier.
Robustness neighborhood	A predeclared set of nearby rule choices used to check whether a result is broad or depends on one narrow parameter combination. It does not authorize replacing the frozen base rule.
Sharpe ratio	A risk-adjusted measure comparing average excess return with return volatility.
Long straddle	A purchased call and put at the same strike and expiration that benefits only if the move is large enough to overcome both premiums and costs.
Skipped trade	An opportunity that was not simulated because a frozen requirement—such as a valid quote, eligible contract, liquidity threshold, or risk budget—was not satisfied.
SOFR	Secured Overnight Financing Rate, a U.S. dollar reference rate used here as an input to financing and option models.
SPY	The ticker for SPDR S&P 500 ETF Trust, an exchange-traded fund designed to track the S&P 500 Index.
Strategy version	An immutable set of rules and assumptions. Any material rule change creates a new version.
Tail risk	The risk of rare, unusually large losses beyond ordinary day-to-day fluctuations.
Training period	Historical data used to develop or calibrate a strategy before independent validation and holdout testing.
Underlying asset	The security or index from which a derivative, such as an option, derives its value.
Validation period	Historical data used to evaluate a frozen strategy after training but before the final untouched holdout.
Vertical spread	Two options of the same type and expiration with different strike prices, creating bounded exposure.
Profit factor	Gross profit from winning completed trades divided by the absolute gross loss from losing completed trades. It complements win rate because a high win rate can still lose money when losses are much larger than wins.
Paper equity	The current simulated account value in the isolated Alpaca paper account. It includes paper cash and marked paper positions; it is not real capital or a guaranteed liquidation value.
Active maximum risk	The currently reserved modeled loss across open or submitted bounded-risk paper positions. It excludes unused buying power and cannot override full-collateral requirements.
ATR	Average True Range measures recent price movement magnitude, including overnight gaps. TradeMight records 14-session ATR as observation-only context; it does not alter the six frozen paper signals.
RSI	Relative Strength Index compares recent gains with recent losses on a 0–100 scale. TradeMight records 14-session RSI as observation-only context rather than treating it as an automatic overbought or oversold instruction.
VIX	The Cboe Volatility Index estimates the options market's expected 30-day S&P 500 volatility. It measures expected movement, not market direction, and is observation-only context for the frozen paper candidates.
VIX term structure	TradeMight compares VIX with the three-month VIX index. A ratio below one is commonly called contango or a normal upward-sloping structure; a ratio at or above one is backwardation and can indicate elevated near-term stress. It is observation-only context.
IV/RV ratio	Implied volatility divided by recent realized volatility. Values above one mean option-implied variability exceeds the measured recent underlying variability; the frozen strategy defines whether and how that ratio is used.
Trade qualification	The ordered checks that determine whether a frozen strategy signal, eligible option structure, execution-quality requirements, and portfolio-risk limits all pass. A structure alone cannot create a trade.
ROI	Return on investment here means the percentage change in total modeled portfolio equity over the stated stage, including idle collateral, fees, and execution costs.
Win rate	The percentage of completed trades with positive modeled profit and loss. It must be read with sample size, payoff magnitude, and profit factor.