Last updated on February 9th, 2022 , 10:02 am
In the below guides, projectfinance will teach you everything there is to know about the Greeks in options trading!
Option Greeks 101
If you want to trade options, you must know the Greeks. The good news? They can be simplified. Delta · Gamma · Theta · Vega.
Option Risk #1: Delta
Delta estimates an option’s price change when the stock price rises or falls by $1. In other words, delta is used to gauge an option’s directional exposure.
Option Risk #2: Gamma
An option’s directional exposure changes when the stock price shifts. Gamma estimates how much an option’s delta will change when the stock price rises or falls by $1.
Option Risk #3: Theta
The passage of time is the enemy of option buyers, and the best friend of option sellers. Theta estimates how much an option’s price will fall with each day that passes.
Option Risk #4: Vega
Implied volatility rises and falls with investor sentiment. Vega estimates an option’s price sensitivity relative to changes in implied volatility.
The Best Brokerage for Traders
We’ve been trading with tastyworks for years, benefiting from their trader-friendly fees:
- Free Stock Trading
- $10 Commission-Cap Per Option Leg
- Close Trades for Free*
- $10 Max Fee Per Crypto Order
Use the link below to check out the tastyworks $100 to $2,000 signup bonus offer.
* Applicable exchange, clearing, and regulatory fees still apply to all opening and closing trades except for cryptocurrency orders which are not subject to exchange, clearing, and regulatory fees.
projectfinance Options Tutorials
About the Author
Chris Butler received his Bachelor’s degree in Finance from DePaul University and has nine years of experience in the financial markets.
Chris started the projectfinance YouTube channel in 2016, which has accumulated over 25 million views from investors globally.