OPTIONS

Sunday, July 27, 2008

The Impacts of TIME REMAINING TO EXPIRATION on OPTIONS GREEKS: Summary

The Effect of Time Remaining To Expiration on DELTADelta is a measure of the change in the option price resulting from a change in the underlying stock price.An option’s Delta does change as one trading day passes. This is often called as “Delta Decay”.As the expiration is nearing (time to expiration gets shorter), the time value portion of an option is declining (time decay effect).This causes the delta of ITM (In-The-Money) options to increase...

Sunday, July 20, 2008

Reading Links

Another few good readings:* Stock Bandit: Trading With Objectivity* Trader Psychology: Who Should Not Be A Trader?* Chris Perruna: 10 Steps to Profitable Trading* Stock Trading To Go: Timeline of 17 Recessions and World Crises Since Great Depression* Afraid To Trade: Confirmed Bear Market Rally Under...

Saturday, July 12, 2008

Options Greeks and Position in the Market (Long vs. Short): Summary

DELTA and the position in the market:* Long calls have positive delta; short calls have negative delta.* Long puts have negative delta; short puts have positive delta.* Long stock has positive delta; short stock has negative delta.Positive delta means that the option’s value will increase when the underlying stock price increases, and will decrease when the stock price decreases (positive relationship).Negative delta means that the option’s value will increase when the underlying stock price drop, and will decrease when the stock price rises (negative...

Saturday, July 5, 2008

Options Greeks vs. OTM, ATM & ITM Options: Summary

1) Option Greeks: DELTADelta is a measure of the change in the option price resulting from a change in the underlying stock price.The delta values will be positive for Calls & negative for Puts.At-the-money (ATM) options have (absolute) deltas around 0.5.Out-of-the-money (OTM) options have (absolute) deltas between 0 to 0.5.In-the-money (OTM) options have (absolute) deltas between 0.5 to 1.2) Option Greeks: GAMMAGamma is a measure the rate of...