Two traders take opposite sides of the same straddle with a delta near zero, and a $3 jump makes one about $92 and costs the other the same. This lesson shows how to read a whole position with the Greeks.
After this lesson you can
- Add up a position's delta leg by leg, with short options counted as negative
- Explain gamma and why it is biggest near the strike and close to expiration
- Compare theta with the daily move a long-gamma position needs to break even
- Know when to stop trusting the Greeks and reprice a position instead
- Read a calendar spread by its five numbers, see how a long straddle earns from the swings, and avoid the five mistakes
Chapters
- 0:00Delta near zero, opposite results
- 1:09Adding up a position
- 2:18How fast delta changes
- 3:33Where gamma is biggest
- 4:32Paying for movement
- 5:44One position, five numbers
- 7:03Small moves only
- 8:13Earning from the swings
- 9:19The seller's side of the swing
- 10:26Five mistakes
- 11:19The whole lesson on one screen