Hi everyone, this is matt from mad strats. I recently posted an introductory video about options trading at the end of the video. I quickly mentioned the concept of option. Greeks.

If you have ever traded options, there is a good chance. You've seen option greek values. I thought it could be helpful if i took the time to explain what all of these values mean. If you are interested in this type of content, hit the subscribe button for more.

If you want to support my educational efforts, the best thing you could do is share this video with a friend. I appreciate your help now. Let's talk about the greeks, no, no! No, not these greeks, i'm referring to the lesser-known, less muscular option, greeks, theta, vega, delta and gamma. These values are derivatives of the options, pricing model and inform traders about how the value of an option premium will change.

These are dynamic in the sense that they change with time and shifting market conditions theta. The greek value i personally pay attention to the most represents the rate of change between an option's price and time. Sometimes this value is called time. Decay theta indicates the amount and options value would decrease as the time to expiration gets closer.

For example, if you owned a call option with a theta of negative 0.25, the options price would drop by 25 cents every day that passes. If all other things are the same, the magnitude of time, decay generally increases as the expiration date becomes. Closer vega represents the rate of change between an options premium and the underlying stock's implied volatility. Vega indicates the amount in options price would change, given a 1 change in the implied volatility, it's important to know an option.

Value rises, as volatility rises. An option with a vega of 0.25 indicates the options. Value is expected to change by 25 cents. If the implied volatility changes by 1 percent vega is at its maximum for at the money options that have longer times until contract, expiration delta represents the rate of change between an options price and a one dollar change in the underlying stock.

The delta of a call option can range between zero and one while a put option can range between negative one to zero. As an example, let's assume you own a call option that has a delta of 0.5. This means, if the underlying stock increases by one dollar, the options value would increase by 50 cents. If the underlying stock dropped by one dollar, the options value would decrease by 50 cents.

If you're curious about how a put option would react, it would be the exact opposite in each of these examples. Gamma a value i rarely track represents the rate of change between an option's delta and the underlying stock price. Gamma indicates the amount the delta would change. Given a one dollar movement in the stock, if you had a call option with a delta of 0.5 and a gamma of 0.02, a 1 movement in the stock would prompt the delta value to change by 0.02.

This greek value essentially details how volatile the options delta is. Gamma values are typically highest when the stock's price is near. The options strike price. There are other greek values, but these are the main ones you should be aware of.

In my opinion, i hope i was able to answer your basic questions about option. Greeks feel free to leave a comment below. If i missed anything, if you learned anything or enjoyed the video, i would appreciate it if you could hit the like button. Best of luck with your training and as always may the odds be in your favor.

You.