I’ve been trading for a few months now and keep hearing about option greeks but honestly don’t get what they mean.
Delta, gamma, theta - these terms are confusing. I’ve made trades without really understanding them and might be missing something important.
How do these affect my trades? Should I pay attention to all of them or just focus on certain ones when starting out?
Back when I started, I completely ignored greeks and got burned hard on a Tesla call that expired worthless in two days.
Theta killed me because I didn’t realize how fast options lose value near expiration. Lost $400 learning that lesson.
Delta is what I watch most now. If delta is 0.50, my option moves $50 for every $100 the stock moves.
Theta eats away $15-20 a day on my weekly options near expiry.
Focus on delta and theta first - these two will save you more money than anything else. Delta tells you profit potential, theta shows you how much your option bleeds value each day.
I learned this the hard way after watching profitable positions turn into losses just from waiting too long. Theta is brutal on options close to expiration.
Once you get comfortable with those, add gamma to understand how volatile your delta can get. But seriously, master the basics before complicating things.
Option greeks measure price sensitivity:
• Delta - price movement per $1 underlying change
• Theta - daily time decay cost
• Gamma - delta acceleration
Start with delta and theta only. Track these before entering trades.
Consider greeks as your risk meter for trades. Delta shows how much your option price changes when the underlying stock moves one dollar.
Theta is crucial to monitor as it indicates daily value loss from time decay. I’ve faced issues with this in my early trades.
Gamma becomes more important for options with shorter expirations since it reflects how quickly delta can change. Start with delta and theta, adding gamma when you feel more at ease.