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THE ESSENCE OF OPTIONS GREEKS IN THE OPTION MARKET

16Apparently, the changes that happen when options are being traded depends on the price of the underlying asset, changes in the market interest rates, time value(decay) of the option and the volatile nature of the options.It is critical for any investor to identify how the options operate in order the best approach to use to make a gain in the options market. Greeks options come about in the explanation of different options since most terms applied basically originate from Greek context. For instance, the Black-Scholes model which act as one of the pricing models is mostly applied in option trading.This model tend to bring out the aspect of volatility and the quantifiable factors that affects it.

Investor in Greek Option

In best options greeks strategy, there are four major components that each investor in option (either a buyer or a seller) should be concerned with. They include:

Delta

This is a unit measure that is used to evaluate the opportunities that the buyer or seller is exposed to in option trading. It tends to bring out on how the option price can be affected in relation to the movement of the underlying asset.

Theta

This is another great component that measures that brings out the exposure in which the option price can be affected after a designated period of time. It also brings the aspect of time remaining in relation to the expiry of an option.

Gamma

This is unit measure that explains on how the option delta is exposed to a certain level of risk in relation to the movement displayed by the underlying asset. At this point, the time value is a matter of consideration as it is one of the essential factors.

Vega

This is a component that is responsible for measuring how the option price is exposed in the option market in relation to the volatility experienced.

Sensitivity Of Option market

Option market is sensitive and thus as an investor it is very crucial to know and establish the changes that occur in such kind of market.

 

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