Frequently Asked Questions
Stock Options
What are the Greeks in option trading?
Delta: measure the change in the price of an option with a $1 change in the price of the stock. Delta for call range between 0 to 1 while for put range between 0 to -1.
- E.g. Delta of 0.5 means if the underlying stock increase in price by $1, the option price will rise by $0.5.
Gamma: reflects the rate of change in the delta in response to a $1 change of the underlying stock price.
- E.g. Gamma of 0.1 means if the underlying stock price increasse by $1, the option delta will increase by a corresponding 10%.
- E.g. Theta of 0.9 means the option price will decrease by $0.9 per day till expiration.
- E.g. Rho of 0.2 means the option price will increase by 0.2 for 1% increase in the risk-free rate.
Vega: measure the price sensitivity of an option to changes in the volatility of the underlying stock.
Theta: also known as time value of option measure the rate of decline in the value of an option due to the passage of time.
Rho: measure the rate at which the price of an option changes relative to a change in the risk-free rate of interest i.e. U.S Treasury bill’s risk-free rate.
Greeks are dynamic and will change throughout up till expiration of the option.
Other faq that might help you
- How are options classified?
- How do I make sense of an option symbol?
- What are the moneyness of options?
- What are the risks involved in trading options?
- What happens after I’ve entered into an options position?
- Are there any forms required prior to trading Options?
- What are the eligible account types to trade Options?
- How long is the approval process for Option Activation?
- How do I read the Option Portfolio balance?
- Why are Exercise/Assignment activities not shown on the same day of the e-statements?
- What are some of the common reasons for order rejection?
- How do I transfer funds into my Options Account? (Video Guide)
- How do I transfer funds into my Options Account?
- How do I transfer stocks into my Options Account? (Video Guide)
- How do I transfer stocks into my Options Account?
- Why is there a need to transfer funds/stocks prior to trading options?
- Does POEMS support option strategies?
- What are the supported platforms?
- Is there US Pre-market Trading for options?
- What are the tradable counters available for options?
- What happens if the underlying share is delisted onto OTC?
- Glossary
Did this answer your question?