Understanding Greeks in Options.

Not sure if it’s me vs math, but greeks in options is similar to learning a new language… well for me anyway. Learning or skipping out on the fundamentals of greeks in options can mean life or death for your option contracts.

Fortunately, they’re not super difficult, and well, there are only 5 parts to them.

Theta

How much an option’s value will decay every day you hold it. This is why short-term option expiries are cheap, but also extremely risky.

Delta

How much an option’s value will appreciate for every $1 change in the underlying stock’s price.

Gamma

How much your delta changes for every $1 change in the underlying stock’s price.

Vega

How much an option’s value will change, accounting for every 1% change in IV (see below).

Implied Volatility

How the market currently views a security. The higher the IV, the more highly-priced options will ultimately be as price swings can go in either way and are viewed as riskier. A benefit of being on the correct side of this trade, however, is that it will amplify your gains.

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