Option Greeks help
I’ll try to keep this as simple as possible, and please understand Greeks are changing the entire time a contract/market is open, but I hope this helps you out.
This is how much the option value changes with a $1 change in share price.
For instance, I have a $TSLA 200 call with a delta of .48 and share price goes from $199-200 my option contract has now increased by $48.
The closer you are to at the money, the closer delta will be to .50
If you’re selling options you can look at delta as the % your contract has. So if you sell a .20 delta call you have an 80% of keeping your shares.
This is how much Delta will increase with a $1 move in share price.
So for instance in the above example, if gamma was .03 now the new delta would be .51 with the $1 increase in share price.
This is your “pay to play”. This is how much the contract will decrease in value over 24 hours.
So if your Theta is .80 your contract value decreases $80 every day.
The closer you get to expiration the more theta ramps up. Once you get within 30-45 days of expiration it really picks up even more each day.
So if you’re buying contracts, theta is your enemy, so buy time to be safe.
If you’re selling contracts, theta is your friend, so sell less time to take advantage of theta.
A good rule of thumb I use is I buy twice as much time as I think the move will take. So if I think the move will happen in a day, I buy weeklies. If I think it could take 2 weeks, I’ll buy a month.
This is going to be options price change with a 1% change in implied volatility (IV)
So you want to sell high IV not buy it.
The higher the IV the more expensive premium will be.
Once again, you want to collect this, not buy it. Unless you are certain of the direction of the move.
And remember, in the markets, there are no certainties only probabilities.
This is going to be the change of an options value with a 1% change in interest rates.
So for real…. No one cares.
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