Option Trading | Get To Know The Greeks | Stock Market | Blackbox Trading - YouTube

Hey guys what's going on in this video? I'm gonna talk about Greek options and

how they affect you in your trade, so I'm basically just gonna make this a more simplified version of

all of this

Because really and then a lot of this is just kind of boring, but you still need to know it

So first off let's start with

Your layout so if you're using TD Ameritrade the thinkorswim platform

you'll come up here to layout and click on that and

You know if you have the default settings

It could be right there. Just clicking at it

But if you don't just click customize and you'll just type it in up there and add them and there you go

So I normally don't have all of these but for this video, I went ahead and added everything just so I can just show you

So, let's start off with theta so theta is basically a

Measurement of time

Technically time decay, so

If you are taking a

We'll start with the calls if you're taking a long position

with calls so you bought something right here on the ask and

as

This contract approaches the expiration

Data goes against you

Especially if you are out, you know out of the money, so if you're down here in this black area

Theta goes against you hard now

The same is true over here if you're taking a long position for the puts

The closer it gets to expiration

The worst data becomes

So, let's go back here

if you're taking a short position with the calls, so the bid or

The puts the bid over here as well

Data actually is in your favor

because

with these

contracts right here

The closer if you're selling this

And in my last video, you know, I actually explained the difference between all of these. So if you don't know

What I'm talking about, you should probably go and watch that video

So anyways

If you're selling these contracts right here

so your contract writer you're selling them and

as

This gets closer to expiration

You actually benefit by these contracts

Technically losing more money and that's not you know, you lose the money. That is the people who

Are on the long side they are losing their money. So

Your bond up here and you're covering down here. You make the difference. So that's how that works. So

Let's take a quick look at data here we are for theta and as you can see

Right here, you know theta is not too bad

It's only minus five five cents

But then he goes ten and then you know higher and it hits minus twenty cents and he starts going down

You know, so at this point you may be thinking why is it going down?

That looks like a better value for theta it's not that bad down here at four cents

Well, the thing is if you come over here

And look at the price

This contract is selling at thirteen cents, so

13 times

104 because each contract controls 100 shares that's only it's only about you of $13

So

There's only so much money you can pull out of something that's worthless

Versus going up here to where this

you know is going for three dollars to fifty five cents and you got

Theta4 - 20 cents you can pull a lot more out of more money. So that that's pretty obvious now

If

You go over here and look at the puts, you know, it's the same thing so the theta

As

you

You know start to get out

It gets worse because you know your values are dropping now if you're looking right here

reason, why data is so high is because

You know this ticker right here is up trending

At this moment, so this ticker is up training. So it

Puts a lot a lot of theta on the side of

The puts because of puts, you know, you want the price to go down so if the price is going up over here

Then obviously the people over here in the long positions. They're losing money

So then theta goes up

So that's how that works. Um

You know, I'm gonna hit the other three but

If if you want to learn more about this, you know do some research

I mean you can get more in depth on all of them

But it really have to end of the day

You just need to know what to do and how you how they affect you in your trades

so

Next we're gonna talk about that Delta

so here are you we have Delta and

basically Delta measures

the direction for the amount of money that you will make

for every dollar that this trade this stock either moves up or down so

Just to simplify this and keep this short

We'll just we'll talk about the callsign, you know, because it holds true over here and I just I'll just continue to be redundant

So here we are with the Delta

So for we'll just look at right here

point six two so sixty two cents is

the Delta so for this ticker right now, it's not priced at

$149 and twenty-nine cents

if this goes up to

one hundred

fifty dollars and twenty-nine cents

it moves up one dollar obviously and so you will make

that difference of

Sixty two cents on your contract

so as

You start seeing this go deeper into the money as it starts moving, you know in dollars

You start making a lot more money. And so

Let's just say you

You get in right here and then it makes a dollar so then it goes up here to the next level and

You know now right there you just just made that much money so then it goes up one more dollar now

You just made that much money and and so on so that's how it works

Now on the flip side of that

If the value drops a dollar and it starts, you know going down especially once it gets out of the money

you can see the difference and

And how much you actually lose, you know, I ain't saying that you're gonna lose like seventeen cents. No, that's

When you come from here to here

That's the difference you lost and everything and that is

Drastic soaps so bad. This is a vote

You know you you have to keep an eye on

your Delta and

The Delta actually kind of in a sense acts

Almost like a profitability

so a lot of people like to trade Delta's that are

You know 0.7 zero

And basically the reason why they're going that is if you look at this strike price right here one hundred forty eight dollars, so

This is basically saying that by February the first

that

Roughly there's a

72% chance that it will stay in the money, so

That's how a lot of people kind of trade this as well so

Moving on to the next one gamma so with gamma

It's basically the measurement of acceleration so

For instance if you if you look right here

This first level, you know, this contract is at the money and

You look at the gamma. You see all these four cents for for gamma

Now for every dollar that, you know coming back to the Delta real quick for every dollar that this increases or decreases, you know

That's how your position adjusts with this price

so

This is technically

Like how much?

Over here is basically, you know

how how quickly I hope this makes sense, but like how quickly

That this is gonna happen so

If you look right here at this first contract that is out of the money

Now because it's out of the money it is gonna be cheaper and

Let's just say that this ends up going, you know in the money now when you're hanging out around

This area right here at the money

The gamma is it's gonna be its greatest at this point and as it gets further away

from this this at the money point

It you know, it decreases so

let's just say you you buy this contract just this first one out the money and

You just know for whatever reason you just know that this price of the stock is gonna go up so you get in here

and it goes up so

The percentage was of

You know of how much you make

You know

I guess that you know, like guess the best way to say it is

It it accelerates the you know the rate of money that you get, you know, it's kind of hard to to explain

honestly and

the math mathematical formula

is

It's crazy. I mean they have calculators that can you know

compute it and whatnot, but

There's no need for that when you know, the system just tells you what it is, but honestly there's you know

Just know once this is about I mean

Personally I don't I don't even keep gamma up. It really really doesn't matter to me at all

especially since I'm a momentum trader, I mean I I know

If I'm trading on momentum at the moment, it's going in my favor. I'm gonna make money quick if it's going against me

I'm gonna lose money quick. So

That's what I focus on and at that point really

gamma is the least of my

cares, so hope

So going back to this. Um, you can see as we get further deep into money it goes to zero and

You can also look at the difference. So we'll just talk about this one right here

So 1305 and then it goes up to thirteen eighty. But if you if you look down here

Let's see

We'll go right here. So you have three dollar 755 and it jumps up to 470 then 425 and

You know the values crow quicker and and then the body is kind of slowed down

You know, I guess that the best way to put it

On adding more more money and

You know on opposite side of it the further you get away

You know your gamma it just drops pretty much to nothing so

It's pretty much, you know gamma for you. So the next one, let's see we did

Delta Gamma, so

Vega

So Vega is pretty much the you know

volatility and

In your trade so with Vega Vega

Increases

With each

Percentage point of

the implied

volatility, so when you hear people talking about

You know the IV in in options

That's what the talk about is the implied volatility. So

If you look you can see the Vega

you know these figures right here and

As these percentage points change as it goes down the value you can see the Vega

increasing right there

And then it starts breaking back down as it just gets so far out of the money so

You know

that's basically what you know, just that's not basically that's exactly what you know Vega is it's just a

measurement for

Volatility and you know again

when the percentage changes in the IV

that's how

You know forever it for every dollar that it changes that

Percentage in na'vi changes and so forth, you know your IV changes

as well

so

This is a simplified version for the Greek options and

You know, I mean you can you can do more research on it

It just depends on how you trade and

What what you're looking to get out of this for me B because I am a momentum trader. I

you know, I

Honestly like to have the theta up I mean, you know Delta matters and

The reason why I don't really throw up the gamma or Vega is one volatility

full momentum momentum trading I

already know that there's

volatility that's that's you know, that's what I trade so I don't need this in my trades because I

Already know it's gonna be volatile, you know the gamma

Just doesn't matter to me, um

Now Delta, you know does

Doesn't matter to an extent, but

You know with the way on trade

You know, I pretty much hate in a decent delta's anyways

so

that's why I don't even had that but I always keep data up just because

you know since I trade, you know, the long calls of books and

Data is not your friend know when you're on that side of this trade. So, you know, I hope this video

you know helps helps you out helps you understand a little bit and

You know there really wasn't a need to to really make this video any longer than what it is

but if you if you feel inclined to I

Just really study it

Fun

um, I appreciate you guys, you know watching this video in this course and

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Again, I appreciate you taking your time to watch this video and I will see you in the next one