Most options traders focus on strategies such as covered calls,vertical spreads, butterflies and condors, and so on. But tradersoften don't know how to use the "greeks"—the five factorsthat influence an option's price—to trade moreeffectively.
The "greeks" (Delta, Gamma, Theta, Vega, Rho) are tools tomeasure minute changes in an option's price based on correspondingchanges in:
- Interest rates
- Time to expiration
- Price changes in the underlying security
Using the greeks can lead to more accurate pricing informationthat will alert an option trader to mispriced derivatives that canbe exploited for profit. In straightforward language and making useof charts and examples, Passarelli explains how to use the greeksto be a better options trader.