Start with the index
An interest rate that rises and falls with general market conditions. The lender picks it when you apply, and it generally stays the same after closing.
Add the margin
A number of percentage points the lender adds to the index. It is written into the loan agreement and doesn't change after closing. Margins can differ a lot from one lender to another.
Apply the caps
The initial adjustment cap limits the first move, the subsequent cap limits each move after, and the lifetime cap limits the total distance from the initial rate. A floor, if there is one, stops the rate from falling below a set level.
Check how often it resets
Many ARMs keep the initial rate for a period of years and then reset at regular intervals, but that structure is not required. Some loans have no initial period at all.
Ask about the payment
For most loans the payment changes with the rate. If yours recalculates less often, the balance can grow even while you pay on time, which is called negative amortization.
Ask about the extras
Whether there is a floor, whether the rate can only go up, and whether there is a fee for paying off early. Each one changes what the loan can cost.
Test it
Put the caps from your Loan Estimate into the calculator, then try three index paths. The highest-payment line does not depend on the path at all.