The 5 Most Important Option Greeks
One of the most important concepts we need to dominate is the option greeks.
The option greeks are used mainly to calculate the different forms of risk that are present during the trade and for a particular option contract.
Basically, through the option greeks, we will be able to determine how the variation of some parameters, like the time to expiration or the implied volatility, affect the option premium of the strategy. One of them will even tell us the probability of winning a trade, because unlike some people think, trading options is not like gambling as we discussed here.
On many occasions, some brokers do not offer the possibility of displaying the value of the option greeks, which can lead to many problems if we want to take control of the strategy. That is the reason why we have created an advanced option profit calculator Excel that show us the value of every single option greek.
If you want to know more about the features, the Advanced Option Trading Calculator provides, check this link to learn more.
Do you need a Calculator that helps you create and analyze any option strategy in record time? |
There are mainly five major option greeks which we can use to determine how the option premium change, and these are…
Option Delta
The option delta is often considered one of the most critical option greeks in the market. Using it, we can determine how the option premium will vary concerning changes in… Read more
Option Theta
Through option theta, we will be able to understand how time decay affects our options contract. As we know, time decay can be a powerful ally or a… Read more
Option Vega
Vega is a greek which will allow us to glimpse the changes in the option premium produced by the variations of the implied volatility of the market. With vega, we will be able to apply strategies that require… Read more
Option Gamma
From gamma, we will be able to understand how delta varies as the underlying prices change concerning the strike price. In fact, gamma is a greek that measures the variation of another greek, but it will be extremely useful if… Read more
Option Rho
Rho will tell us how interest rates affect option premiums. This greek is especially useful for those options that expire very… Read more
Secondary and Tertiary Greeks
Apart from the five main greeks we have mentioned, there is a wide variety of secondary greeks which, as option gamma, that measure variations of other option greeks.
For example, vomma measures the variation of vega, or lambda, which tells us the amount of leverage an option provides.
If you want to know more about these secondary and tertiary greeks, here are some links to the Investopedia website , where you can learn more about other option greeks such as vomma, zomma or ultima.
Have you just started with options or you still find some concepts confusing?  With the series of books Options Trading For Everyone you will learn everything you need to dominate the option market |