Posted on February 16th, 2010 admin No Comments
### Option Greeks

The “Greeks” in options trading is known as a way to measure the sensitivity of an option price to changes in its parameters. The Greeks can help option traders to better understand the potential risk and reward of an option position. However, it is important to note that the numbers given for each of the Greeks are strictly theoretical, as they are only projections based on mathematical models.

- Delta: is a measure of the change in the option price resulting from a change in the underlying stock price.

- Gamma: is a measure the rate of change of delta due to a one-point change in the price of the underlying stock.

- Theta: is a measure of the rate of decline of an option’s time value resulting from the passage of time known as time decay.

- Vega: is a measure of the sensitivity of an option’s price to changes in Implied Volatility (IV).

- Rho: is a measure of the change in an option’s price due to a change in interest rate. If interest rates increase this will mean that the call options value increases and the put options value decreases.

To receive ASX Option Recommendations or to learn more about trading options please request the complete Introduction to Options Trading eBook by contacting us on 07 5504 2244 or info@totaloptions.com.au

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