Tackle Today: Delta Brings Precision to Probability
February 23, 2022
«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.
Options Greeks Guide Part 1: What Are Options Greeks
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.
Options Greeks Guide Part 2: What Is The Black-Scholes Model
What is the Black-Scholes Model and how to use it in your trading? This is what this video will cover.
Options Greeks Guide Part 3: What Is Delta
Delta is the most famous options Greek. Come learn what Delta is and how it can help you become a better trader.
Options Greeks Guide Part 4: What Is Theta
To professional traders, Theta means CASH FLOW and PASSIVE INCOME. Come learn more about this powerful option Greek and how it can benefit your trading skills.
Options Greeks Guide Part 5: What Is Vega
How does Vega work? What is the correlation between Vega and volatility? How does it affect options premium? That is what you will learn in this video.
Options Greeks Guide Part 6: What Is Gamma
What is the correlation between Gamma and Delta and how does that impact your trading business? Learn more about this underrated option Greek in this video.
Options Greeks Guide Part 7: What Is Rho
What is Rho? How does Rho affect options premium? This is what you will learn in the latest episode of this Options Greeks video series.
Chart of the Day: Median Selloff on Earnings Misses
“U.S. companies that missed their earnings estimates have been severely punished.”
Today’s line up
Traders Lounge 11 AM EST
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The Coaches Show Replay
If you missed last night’s episode where Coaches Mark Justice and Tyler Craig talked about When Do You Start Putting Money to Work or would like to watch it again, check it out here.
Halftime Report 12:30 PM EST
The Halftime Report starts at 12:30 EST and covers what news is driving the market, chart analysis from the movers and shakers of the day, and fun in a way that only Matt and Tim can deliver.
Trade Masters 7:00 PM EST
Every Wednesday at 7 PM EST join us on the Trade Masters where two Coaches go head-to-head to see who can find the best trading setup.
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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