- Option Delta. How to understand and apply it to your trading
- Gamma Definition
- Delta Quants - Managing risks of Digital payoffs - Overhedging
- Greeks for Binary Options : Delta, Gamma, Rho, Vega Theta
Keep in mind that for out-of-the-money options, theta will be lower than it is for at-the-money options. That&rsquo s because the dollar amount of time value is smaller. However, the loss may be greater percentage-wise for out-of-the-money options because of the smaller time value. When reading the plays, watch for the net effects of theta in the section called &ldquo As time goes by.&rdquo
Option Delta. How to understand and apply it to your trading
I think the best way to understand the behavior of option prices, the greeks etc is to simulate them using an option model. You can download my option spreadsheet from this site or use an online version such as this option calculator.
Love your site. Good work, and thanks.
Your last comment on this page was, the put delta will also decrease as the option moves further out-of-the-money.
However, won t the put option increase (. move closer to zero from negative one) as the option moves further OTM?
Delta Quants - Managing risks of Digital payoffs - Overhedging
I few basic questions :
6) Why 75 delta options are the most liquid option.
7) why otc markets trader quote in terms of deltas and implied vol. For a layman i would approach a trader to quote a call / put for a strike price.
Greeks for Binary Options : Delta, Gamma, Rho, Vega Theta
Not sure what you mean by CE/PE - but you can either use my option spreadsheet or an online option calculator to simulate various option greek and pricing values.
Today apple calls have been tradin with an inverted delta curve, meaning OTM calls have a higher delta than ATM calls. Is that common. Can someone explain this to me?
For now, just keep in mind that if you are trading shorter-term options, changing interest rates shouldn&rsquo t affect the value of your options too much. But if you are trading longer-term options such as LEAPS , rho can have a much more significant effect due to greater &ldquo cost to carry.&rdquo
Beginning option traders sometimes assume that when a stock moves $6, the price of options based on that stock will move more than $6. That&rsquo s a little silly when you really think about it. The option costs much less than the stock. Why should you be able to reap even more benefit than if you owned the stock?
Actually, I think it is correct. The graph is showing the delta of a 55 strike put option, which has a negative delta. As the stock price declines, the option becomes shorter hence the delta approaches -6. When the put option is deep in the money the delta will reach -6 and behave like a short underlying position.
As the stock price increases and becomes out of the money the delta will approach zero and eventually become worthless.
Let me know if you dissagree.