You take the diameter of the stud. So if you have 1/2" stud then the threaded portion of the stud must protrude 1/2" into the head (hex portion of the lug nut).

Imaging you have a lug nut with a 3" head. You would need to have the threaded portion of the stud engage the first 1/2" of the lug nut.

It is all about thread engagement.

Also if your studs have and un-threaded portion on the beginning this area does not count as engagement. It has to be 1/2" of threads on threads.