Articles » Options Course
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Blessed Are The Greeks - Part II
In Part I, we introduced the concept of the Greeks as trading tools and discussed delta and theta. We continue by examining gamma and vega. (Note: unlike the others, vega is NOT a Greek letter.)
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Blessed Are The Greeks – Part I
The ancient Greeks are justly praised for inventing much of elementary mathematics. But it was left to moderns to create the tools that help options traders quantify risk and calculate prices. Chief among these tools are several quantities known fondly as The Greeks: delta, theta, gamma and vega.
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Trading shares of stock has become as common as surfing the Internet. But, like any financial investment, trading stock is risky. The price can fall unexpectedly and stay down for lengthy periods. To offset that risk, and to trade with more funds than you have without borrowing, options are... well, an option.
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Options are contracts on some underlying trading instrument - shares of stock, bonds, a commodity, a mortgage loan, etc. (The list is endless.) But regardless of what the option is on, there are common features. One of the most basic is the contract feature specifying what the option owner has actually contracted for.
