How can I move through words when typing a command in iTerm2?

I finally found the solution to this problem here: https://coderwall.com/p/h6yfda. The necessary steps are shown below:

1. Go to Preferences, Profile, Keys.
2. Set your left ⌥ key to act as an escape character.
3. Locate the current shortcut for ⌥ ← or create a new one, with the following settings:
   • Keyboard Shortcut: ⌥←
   • Action: Send Escape Sequence
   • Esc+: b
4. repeat for the ⌥→ keyboard shortcut with the following settings:
   • Keyboard Shortcut: ⌥→
   • Action: Send Escape Sequence
   • Esc+: f

The default is on Control-left Control-right. To customize, edit preferences/Keys and associate the escape code to some other hotkey of your choice

Open your profile and under Keys tab, use Natural Text Editing option.