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 (i.e. ITM option�s delta gets closer to 1 for Calls or to -1 for Puts) and the delta of OTM (Out-of-The-Money) options to decrease (i.e. OTM option�s delta gets closer to 0).As a result:For ITM options,...

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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...

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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 relationship).For Calls, the value of delta ranges from 0 to 1, whereas for Puts from -1 to 0.Calls have a positive delta because Call premiums increases when the underlying stock price increases, and vice versa, assuming all other factors remain...

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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 change of delta due to a one-point change in the price of the underlying stock.Unlike delta, gamma is always positive for both Calls and Puts.Gamma is the highest for the ATM options, and gradually gets...

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