What are the Option Greeks? | Hedging Options | Risk Managing Options

These classes are all based on the book Trading and Pricing Financial Derivatives, available on Amazon at this link. https://amzn.to/2WIoAL0 Check out our website http://www.onfinance.org/Follow Patrick on twitter here: https://twitter.com/PatrickEBoyleIf you're an options investor, you may have heard about "Greeks" but you may not know exactly what they are or what they can do for you. If so, watch this series of videos where Patrick Boyle explains what these Greek letters mean and how to use them to better understand the price of an option.What can option Greeks do for you?Using the Greeks, an options investor can make more informed decisions about which options to trade, and when to trade them. Consider some of the things Greeks may help you do:Gauge the likelihood that an option you're considering will expire in the money (Delta).Estimate how much the Delta will change when the stock price changes (Gamma).Get a feel for how much value your option might lose each day as it approaches expiration (Theta).Understand how sensitive an option might be to large price swings in the underlying stock (Vega).Simulate the effect of interest rate changes on an option (Rho).What are Greeks anyway?Greeks, including Delta, Gamma, Theta, Vega and Rho, measure the different factors that affect the price of an option contract. They are calculated using a theoretical options pricing model (see How much is an option worth?).Since there are a variety of market factors that can affect the price of an option in some way, assuming all other factors remain unchanged, we can use these pricing models to calculate the Greeks and determine the impact of each factor when its value changes. For example, if we know that an option typically moves less than the underlying stock, we can use Delta to determine how much it is expected to move when the stock moves $1. If we know that an option loses value over time, we can use Theta to approximate how much value it loses each day.what is delta gamma theta vega in options Learn more about your ad choices. Visit megaphone.fm/adchoices