Tackle Today: Delta Brings Precision to Probability

«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.

Chart of the Day: Median Selloff on Earnings Misses

Chart of the Day: Median Selloff on Earnings Misses (source: Deutsche Bank)
Source: Deutsche Bank

“U.S. companies that missed their earnings estimates have been severely punished.”

Today’s line up

Traders Lounge 11 AM EST

Join the coaches in this live lounge, ask questions, discuss ideas or just sit back and listen to veteran traders discuss market conditions.

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 Podcast

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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