Options Delta Explained
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- เผยแพร่เมื่อ 12 ก.ค. 2024
- Options Delta Explained
To get the transcript and MP3, go to: www.rockwelltrading.com/coffe...
The Greeks: 0:00
What Is Delta? 1:33
Things You Need To Know: 6:03
Option prices are influenced by what is known as "The Greeks." They are:
- Delta: measures how much the option price change if the stock moves $1.
- Gamma: Rate of change of the Delta.
- Theta: measures time decay.
These are just a few examples, but there are more.
For right now I am going to focus on Delta.
Delta is a number between 0-1 that measures how much the price of an option changes if the stock moves by $1.
Let's use this example from MSFT trading at $211.20:
Strike Price Delta Current Price New Price
----------------- -------- --------------------- ----------------
205 (ITM) 0.8 6.92 7.72
210 (ATM) 0.57 3.05 3.62
215 (OTM) 0.27 1.06 1.33
Things You need to know:
- Options that are ITM have a higher delta than options OTM
- Options that are ITM are more expensive
- Options ATM are usually around 0.5
- Put Options have a negative delta -1 & 0
- Rough estimate of the probability of the stock price closing above the strike price.
- Delta is not fixed: Changes as the price changes.
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Did this video answer your questions about Delta? Would you like to see me do more videos on The Greeks? Let me know down in the comments below.
The Options Wheel Strategy: th-cam.com/play/PLBa3sAx-Io2nosgosERUhIZwzvIgD-3Vq.html
This is the best tutorial I have ever seen on delta. I'm a fan!
Awesome! Thank you for watching! :)
I can see why this is the best video amongst all the crazy theoretical videos out there trying to explain options and deltas. Awesome. Ty Markus.
😊 You are welcome! I am glad that this helps!
This is an excellent informative video for novice people like me
Hi Balaji Chari, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Love the way you explained this
Hi Geri Burke, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
Great job explaining a complicated topic 🤟🔥
Hi AC Rockett, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
@@rockwelltradingservices for sure!
Thank you for your support, AC Rockett! :)
Good job explaining delta!
Hi Alexander Medvedev, thanks for watching. And thanks for your feedback. Much appreciated. "See you" in the next video 👍
I found it helpful. Thanks.
Excellent explanation, The best I have seen! Thx.
Awesome! Thank you for watching! :)
Broken out simply and superbly. Thank you!
Awesome! Thank you for watching! :)
Great video, thanks!
Awesome! I am glad that you like it. ;) Are you already trading options?
good vid. thanks.
Thank you! :)
More video's on options trading like 0DTE, leveraged ETF's, etc.
Just keep watching! 😊
Close your eyes and it's Christoph Waltz teaching you about options Delta
Thank you. Lol! Have you heard about the PowerX Optimizer? It is a tool I developed that helps traders find the best stocks to trade, helps limit the risk, and gets more winning trades. Let me know if you would be interested to learn more. Here is a link to the current promo www.rockwelltrading.com/products/10-44-powerx-optimizer/
When you say the delta is approximately the probability of closing above the strike, you mean itm, right? So on puts it would be the probability of closing below the strike, aka itm.
Yes, that it correct, Bill. 👍
But where do you go to find it for an option?
Now how does this work if you are selling options
Hi Steven, great question. Some traders like to look at the DELTA when selling options, e.g. when selling options with a delta of 0.10, you only have a 10% chance of being assigned, i.e. 90% chance of options expiring worthless. Does this. help? 👍
In der kürze liegt die Würze 😉
So isses! 😀
The full calculation would be something like:
C + Δp + Γpp + Zppp = N
But, a better way to quickly assess, is to just look at the other strike prices. For example, 24dec MSFT 220 strike is 1.08 mark, 0.24 Δ, 0.04 Γ, and 0.004 Z....by calculation, if the price were to move by +2.5, then it would be (1.08 + 0.24 * 2.5 + 0.04 * 2.5 * 2.5 + 0.004 * 2.5 * 2.5 * 2.5 = ) 1.9925....but if you simply look at the 217.50 strike, it is 1.785, no math required and is a little bit more accurate anyway (the greeks are a guess calculation with vol skew). If we think that the stock will go up 5 points within 6 days, we can also do a little bit of investigation without math....our 220 strike minus 5 is 215....our 24dec minus 6 days is 18dec.....the 18dec215 Call is 1.50, done. The 24dec215 is 2.80, so you technically could start out at 2.80 and reduce it by 0.22 per day, if that is your target over the 6 day period.
This is not taking into consideration volatility whatsoever, but neither does the delta calculation, so keep that in mind.
If a option has a delta of 20 it has a 80% chance of being a winner?