You need to know more than Delta, Gamma, Theta to be a good option trader. To be honest Delta, Gamma, Theta are just the theory on how options are made – they do not give direction of options. You can download a file here where I have explained in details about Delta, Gamma, Theta of options. But this is theory after this you need to learn strategies to make monthly income.
See this chat where this person is failing to make profits even after knowing about Delta, Gamma, Theta:
I keep getting calls from some option traders like Sir I am shorting an option with Delta 0.4 – will this make profits for me.
What is Option Delta?
It is the rate of change of the price of the option with respect to its security’s price. When the security’s price changes the delta of the options will also change – all the options whether near or far month – closer strikes or far off strikes.
For Calls the delta of an option ranges in value from 0 to 1. For Puts the delta of an option ranges in value from 0 to -1.
For every 1 point move in the underlying security – the delta of all its options will change.
Delta of far out-of-the-money options are close to 0 like 0.1 or 0.2, whereas near the money (ATM) have deltas like 0.4 or 0.5 and deep in the money (ITM) have deltas near to 1 like 0.8 or 0.9.
Most Important Point To Remember:
Option Delta varies from 0 to 1 but there is no guarantee or even an assurance that 0.4 or 0.5 or 0.6 or whatever Delta will go in the money or expire worthless.
It is better to research yourself to try out which option strikes works for you. Whether you are a buyer or a seller of options there is no point seeing what Delta an option has before proceeding to buy or sell it.
If there was some assurance that 0.6 Delta or 0.7 will go in the money or expire worthless then all traders would have done the same trade in that option strike – resulting in NO TRADE in that option. If everyone is a buyer or a seller in an option then the trade will not take place.
All this comes with research not reading theories which strikes are likely to expire worthless or likely to go in the money and trade then with hedge so that by chance something goes wrong you will not lose much.
My course will teach you which strike to buy and sell to make a monthly income peacefully.
You can enroll for the course here.
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Dilip Shaw, Founder
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