What Do You Know About Option Theta?

Option Theta

What do you know about option theta? For many, it can be the easiest option greek to understand, but for many others it is the most difficult. Let’s take a quick look below and, let’s hope, clear up some confusion. Theta Definition Theta measures the rate of decline in the value of an option due […]

Rho: It’s Back!

Option Rho

I haven’t had to think about this one for a while. But after 14 years, it’s back in play: the option Greek rho. The Option Greek Rho Let’s just dig right in, shall we? Rho is the option Greek that measures an option position’s sensitivity to a change in interest rates. It works like some […]

Delta Can Make or Break Credit Spreads

One of the biggest topics I discuss in MTM’s daily Group Coaching class is how delta can make or break a credit spread. Option traders associate credit spreads as mostly a positive theta trade. I am going to show you why I believe delta is the bigger factor usually. When you think about selling a […]

A Warning About Selling Naked Puts

With another wave of earnings right around the corner, I feel the need to caution option traders and investors about selling “naked” or cash-secured puts over an earnings announcement. Whether you refer to it as writing or selling naked options, many option traders do not understand the risk. Selling a put option without having a […]

Hard vs. Mental Stops for Option Traders

When to choose hard vs. mental stops as an options trader is a topic that comes up frequently in my daily group coaching classes and one-on-one coaching sessions. The truth is, it is not an easy answer. When it comes to options, stop losses can be a little tricky as compared with an investor who […]

Option Vega Works Both Ways

Option Vega

If you have traded over the past several weeks, you have undoubtedly noticed how volatile the market has been. As an option trader, you are or probably should be familiar with how implied volatility changes can affect option prices. Below we will take a look at a topic I covered in class a couple of […]

Implied Volatility – How Traders Can Benefit From It

Implied volatility - VIX example

Implied volatility is the forecast of a likely movement in the underlying. Keeping it simple, implied volatility is how options are priced. When IV is higher, option prices are higher and vice versa. Generally, when the market moves lower, option prices and IV increase as demand goes higher for protection or a hedge. When the […]

Option Vega – How It’s Different From Other Option Greeks

Option Vega

Option vega, like option gamma, is one of those option greeks that often confuse option traders. But it does not have to be that way. Below we will break down the dynamics of vega so that even the most basic of option traders will have a clearer picture of this mystery greek. What Is Option […]

How to Use Option Theta in Your Trading

Option Theta - long call

Trading options can be a long and frustrating journey without discipline and solid understanding of the option greeks, including option theta, and how to use them in your trading. Most option traders know there is a time component to options. But surprisingly, many do not have a firm grasp of what that really means. Below […]

Option Gamma and How It Differs from Option Delta

Option Gamma v Delta

Although it will always be debatable which is the most important option greek, many option traders point to option delta. This is understandable, considering most new option traders become acquainted with delta first. However, you cannot dismiss option gamma, which is sometimes referred to as a derivative of a derivative. Option Delta and Option Gamma […]

Option Delta – A Comprehensive Guide for Traders

Option Delta

Option delta is probably the first option greek many option traders learn. When I first heard and learned about the power of options, I was intrigued. Instead of buying shares of stock I could purchase a call for far less money and profit if my outlook is correct? Sign me up! There are other greeks […]

Your Option Greeks Quick Reference Guide

Knowing and understanding the option greeks is pivotal for your potential or continued success as an option trader. Listed below are some of the finer points of delta, gamma, theta and vega. Realistically, each could have its own book explaining how it works and its ramifications, but in this options greeks quick reference guide we […]