A very popular method of managing options trades, particularly complex ones, is to use the Greeks… The “Greeks” that we use are Delta, Gamma, Theta and Vega. Delta tells us the rate of change and the profit and loss of our position for the next point move in our underlying. It gives us a number that tells us what that change will be. Gamma tells us how much the Delta will change after one point and can also be beneficial in letting us know how fast things may be moving for or against us. Theta, which is popular in the Sheridan Community [theta positive], shows the effect of time in either benefiting or detracting from your option position Profit/Loss. Vega monitors the volatility of our position and the effects that implied volatility changes will have on our position. It also is a number that tells us how much profit or loss our position will have with a one point move in the implied volatility of the options that we are trading. There is more to trading and managing options than just using the Greeks. Many times I’ve seen traders who thought they could look at the Greeks alone and manage […]