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Options & Volatility

In the Money vs. At the Money Options: An Example

In the money vs. at the money options In the money options are options which have positive intrinsic value. This means that at the moment of expiration (when no time value is left), the option still represents some value if you exercise it. At the money options are options with strike price equal or very … Read more


Intrinsic Value of Options and Stocks

The concept of intrinsic value in finance Intrinsic value is a term frequently used for options and stocks, but it can be applied to any asset. As a financial term, intrinsic value of a security or asset describes the value that is contained in the asset itself. Intrinsic value is often referred to as fundamental … Read more


Measuring Directional Exposure with Delta: Single Option and Option Spreads

Delta as a measure of directional exposure The relationship between the underlying stock’s price changes and the option’s price changes is measured by the well known Greek letter delta. In general, delta measures by how much the value (market price) of an option or an option spread position changes when the market price of the … Read more


Options Basic Terms & Concepts Summary

This is a summary of the very basic terms and concepts of options, including calls and puts, option premium, intrinsic value, time value, implied volatility, and the Greeks. You can follow the links in the article to get a more detailed explanation with examples. Definition and basic logic of options Option represents a right, but … Read more


Long Straddle Delta: Don’t Just Wait till Expiration

In the previous article about long straddle option trades, we looked at them mainly from the perspective of holding a long straddle position till expiration and explored various scenarios for your P/L. Though the buy and hold approach and never looking at the position prior to expiration is one way to trade straddles, you will … Read more


Option Portfolio Delta and Delta Hedging

Delta of a portfolio of options The main benefit of delta as a portfolio management tool is that it is additive across individual options – calls and puts, different strikes and different times to expiration. Of course, all options must be for the same underlying. You can easily calculate the total delta of your position … Read more


Measuring Directional Exposure with Delta

Delta: the king of the Greeks Delta, probably the best known of the option Greeks, measures an option’s directional exposure. Just by looking at delta, you can quickly tell whether an option or a portfolio of options will go up or down given a particular move in the underlying stock, and approximately by how much. … Read more


Delta of Calls vs. Puts and Probability of Expiring In the Money

What delta means Delta, the best known of the option Greeks, is a measure of directional exposure of an option. It is the first derivative of option’s market price with respect to the underlying’s price. Simply said, an option’s delta represents the dollar value by which the market price of the option changes when the … Read more


Directional Trades with Stocks

What is a directional trade In general, a directional trade is a trade in which you are betting on a particular direction (up or down) in the movement of price of a security. If you are right and the security goes in the direction you chose, you make a profit. If it goes the other … Read more


Directional Trades with Options

Directional and non-directional option trades Maybe you have already heard about an option trade being directional or non-directional. What does it mean? In short, this distinction is about how much the trade is exposed to movement in price of the underlying security. This article explains directional trades. Here you can find the second part concerning … Read more



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