You need to set up a couple of key bindings. Go to Preferences->Settings->Keyboard pane in your terminal application. Add the following key bindings:

option + cursor left to ESC+b
option + cursor right to ESC+f

When you re-launch the terminal you will be able to move one word to the right pressing option + cursor left and, analogously, one word to the right by pressing option + cursor right.

For a more thorough discussion check the excellent thread on Stack Overflow