I’m working on a book about options trading while also doing the blogathon, possibly because I am insane, but the good news is that there is overlap. Today, it’s a summary of the Greeks for options.
Options traders use Greek letters to explain different concepts because Greek letters are used to represent variables in mathematics. And here’s the thing: options valuation is mathematical. Many options strategists and traders have advanced math backgrounds; others have the kind of brain that would take to advanced math is they had studied it.
Here’s the summary of the letter and the concept:
|Alpha||Α, α||Return that is not explained by risk|
|Beta||Β, β||Return based on systematic risk|
|Gamma||Γ, γ||How delta changes with underlying price|
|Delta||Δ, δ||How option price changes with changes in the underlying price|
|Theta||Θ, θ||Relationship of option price to time|
|Nu (Vega)||Ν, ν||Relationship of option price to volatility|
|Rho||Ρ, ρ||Relationship of option price to interest rates|