Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits by Dan Passarelli
Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits Dan Passarelli ebook
Jul 7, 2012 - For example, if company BCI is trading at $38/share and the $40 call is selling for $2, with a delta of .50, the following would be true if all other factors remain constant: Understanding theta also drives us to selling our options at the ideal time, not too early and not too late. When you trade spreads that have a high probability of being profitable, you will win most of the time. In that Changes in real rates tend to drive gold prices and vol. When others are fearful.” In his comments, Buffett concisely summed up the twin forces that drive markets: greed, which motivates buying, and fear, which motivates selling. May 27, 2009 - When trading stocks, the idea is to buy stocks that are going to move higher, or as Will Rogers said: "Don't gamble. The option will be In a side-way and quiet market, volatility is low and option premium is cheaper, with all other factors being equal. Mar 2, 2014 - Underlying Price Movement (Delta & Gamma) – Second element of option pricing is commonly known as the intrinsic value, measured by the price difference between the underlying price and strike price. May 21, 2009 - Old May 21st, 2009, 06:24 AM. When the Side-way markets are boring and traders yearn for profits during the quiet times may resort to selling options. It is helpful, however, to understand the concepts of how price, time and volatility play into the value of our option premiums and what that says about the nature of the underlying equities. Each of these variables, with the exception of volatility, is known to traders at any given point in time. The model takes into account a number of variables, including the length of the option contract, the stock price, interest rates and, most significantly, implied volatility. Discussed when talking about measuring risk using the Greeks, one factor that may drive the price of a call option higher (rising stock price) may be offset by other factors, such as the passage of time or a decrease in the option implied volatility. May 25, 2013 - As we have discussed before, large-scale QE has tempered volatility across all asset classes for months, but price movements of this magnitude have yet to occur in other markets.