Options Greeks 🔒
What they are and why they’re important while playing options 🧵:
1. Delta : The underlying estimated move of how much an options contract will move based on every $1 Move up or down. For example, the option is at $2 and the delta is .50. If the stock goes up $1 then the option will go to 2.50.
2. Gamma : The deltas expected rate of change. For example if the delta is .40 and the gamma is .1, then every dollar the stock goes up .1 will be added to the delta.
3. Theta : Calculates time delay, if the theta is -.05 and the option is $1.50 then everyday it will lose .05 in value.
4. Vega : Implied volatility, it calculates how much the premium will change with each 1% move up/down in implied volatility.
5. Rho : How much an options premium will move if interest rates change. Less important than the other Greeks.
Here’s an awesome video that can help you better understand option Greeks.
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