«What are the Odds?»
Today we look at the second definition of the options greek delta
Delta measures the probability of an option expiring in-the-money.
This helps explain why at-the-money options have a 50 delta. If there’s a 50% chance the stock rises or falls then it’s logical that an option with a strike equal to the current stock price carries a 50 delta.
Buying higher delta options is more conservative, in part, because they have a greater chance of being worth something at expiration. This is why we usually suggest buying in-the-money options.
Here’s another related principle:
The probability of an option expiring out-of-the-money is (1 minus delta).
This is particularly helpful when selling options because you want them to expire worthless. For example, if I sell a 10 delta naked put I have a 90% chance of success (1 – 0.10).
Traders who sell naked puts, credit spreads, and condors like to use far out-of-the-money, low delta options because they carry high odds of success.
🛑 Upcoming Options 101 Webinar: Options Greeks for Beginners with Coach Tyler Craig | February 28th, 2022 at 8:30 PM EST on YouTube
Want to really understand what makes an options contract tick? Learn the Greeks. They are the metrics that allow you to measure everything. Join Tackle Trading and get ready for an insightful discussion that will help you take your options trading to the next level.
On this webinar you are going to learn:
✅ What are the Options Greeks?
✅ The two dimensions of Delta
✅ Time Decay and Theta
✅ The role of Gamma
✅ Volatility and Vega
You don’t want to miss it!
Video of the Day: Options Greeks Guide Part 3: What is Delta (BONUS: FREE Options Greeks Guide)
Delta is the most famous Options Greek. Come learn what Delta is and how it can help you become a better trader.
Here are the topics covered in this video:
✅ What is Delta?
✅ How Delta can be used on #PutOptions
✅ How Delta can be used on #CallOptions
✅ How Delta relates to the direction of a #stock
Access the entire Options Greeks Guide video series
Continue learning about this powerful options trading concept: the Options Greeks. The entire Options Greeks video series can be accessed by clicking on the thumbnails below.
What are the Options Greeks and how can you utilize them in your trading routine in order to perform better in the market? This is what you will be learning in this video series.
What is the Black-Scholes Model and how to use it in your trading? This is what this video will cover.
Chart of the Day: Median Selloff on Earnings Misses
“U.S. companies that missed their earnings estimates have been severely punished.”
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Traders Lounge 11 AM EST
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The Coaches Show Replay
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Trading Justice 464: The Options Greeks
In this episode, Coaches Tim Justice and Tyler Craig discuss the Black-Scholes Model and give an overview of how to understand and use the options greeks. The ‘Greeks’ help option traders evaluate positions and better determine how option prices may change as underlying factors change. Listen in to learn more about Delta, Theta, Vega, Gamma, and Rho, and how you can use them in your trading.
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