{"id":31,"date":"2015-01-07T16:38:21","date_gmt":"2015-01-07T21:38:21","guid":{"rendered":"\/?p=31"},"modified":"2016-07-05T15:48:35","modified_gmt":"2016-07-05T19:48:35","slug":"greeks-beginner","status":"publish","type":"post","link":"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/greeks-beginner\/","title":{"rendered":"07) Greeks Beginner"},"content":{"rendered":"<p>In this lesson I will be going over a very important aspect of options trading, the \u201cGreeks\u201d. \u00a0If you want to be a successful options trader, then understanding the Greeks and how they affect your options trades is a must.<\/p>\n<p>For this beginning lesson on the Greeks, I\u2019ll just be summarizing the important factors of each Greek. \u00a0In later lessons, we\u2019ll dive deeper into each one.<\/p>\n<p>The Greeks are &#8230;<\/p>\n<ul>\n<li>Delta<\/li>\n<li>Theta<\/li>\n<li>Vega<\/li>\n<li>Gamma<\/li>\n<li>Rho<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><b>Delta<\/b><\/h2>\n<p>Delta is a measure of the sensitivity of the options contract price, in relation to the underlying stock\u2019s price. \u00a0It can be thought of simply as a \u201cleverage rating\u201d.<\/p>\n<p>The higher the Delta, the greater your money is leveraged. \u00a0Which means the more the options contract price will move up or down with the movement of the underlying stock.<\/p>\n<p>An example being, a Delta of 0.50 would mean the options contract price would <b>increase by $0.50<\/b> should the underlying stock increase by $1 and <b>decrease by $0.50<\/b> if the underlying stock were to decrease by $1.<\/p>\n<p>The further out the expiration date, the lesser the Delta.<\/p>\n<h2><b>Theta<\/b><\/h2>\n<p>Theta is a measure of \u201ctime decay\u201d. \u00a0All options contracts decay in value until they reach their expiration date. \u00a0The amount they decay is noted by the Greek, <b>Theta<\/b>.<\/p>\n<p>As the expiration date becomes closer, Theta will increase.<\/p>\n<p>An example being, an options contract priced at $14 with a Theta of -0.10 will lose about $0.10 into the next day. \u00a0Therefore, if the underlying stock stays the same, the price of this given contract the next day would be about $13.90.<\/p>\n<p>The further out the expiration date, the lesser the Theta.<\/p>\n<h2><b>Vega<\/b><\/h2>\n<p><b>Vega <\/b>is the measure of the options contract\u2019s sensitivity to Implied Volatility. (Implied Volatility is the rating of how much price movement up or down is expected in the underlying stock.)<\/p>\n<p>All options contract\u2019s whether they be calls or puts, rise in price with a greater implied volatility. \u00a0Knowing the <b>Vega <\/b>gives you insight into just how great of a change that will be.<\/p>\n<p>The further out the expiration date, the greater the <b>Vega<\/b>.<\/p>\n<h2><b>Gamma<\/b><\/h2>\n<p>Gamma is a measure of the option\u2019s <b>Delta\u2019s <\/b>sensitivity to the change in price of the underlying stock. \u00a0For every $1 move in the underlying, the <b>Delta <\/b>is changed by <b>Gamma<\/b>.<\/p>\n<p>An example being, if the underlying stock increases by $1, the options contract with an original <b>Delta <\/b>of 0.50 and an original <b>Gamma <\/b>of 0.10 would now have a <b>Delta <\/b>of 0.60.<\/p>\n<h2><b>Rho<\/b><\/h2>\n<p>One of the less used Greeks is the Rho. \u00a0Rho is a measure of the option\u2019s sensitivity to interest rates. \u00a0As a beginner options trader, it\u2019s one that can be ignored for now.<\/p>\n<ul class=\"lcp_catlist\" id=\"lcp_instance_0\"><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/strike-prices\/\">03) Strike Prices<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/expirations\/\">04) Expirations<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/moneyness\/\">05) Moneyness<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/order-actions\/\">06) Order Actions<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/bid-ask\/\">08) Bid &#038; Ask<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/calls-and-puts\/\">02) Calls and Puts<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/selecting-a-broker\/\">10) Selecting a Broker<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/options-chain\/\">01) Options Chain<\/a><\/li><li><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/volume-and-open-interest\/\">09) Volume and Open Interest<\/a><\/li><li class=\"current\"><a href=\"https:\/\/www2.stockmarketwatch.com\/learn\/options\/basics\/greeks-beginner\/\">07) Greeks Beginner<\/a><\/li><\/ul>\n","protected":false},"excerpt":{"rendered":"<p>In this lesson I will be going over a very important aspect of options trading, the \u201cGreeks\u201d. \u00a0If you want [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"video","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center 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