Hi
Time for the weekly option lesson.
Until now we have seen a way from dear AW10 how to start with option trading. We also have seen a simple concept from our friend Healthry how to use any script and combine that with the option data we have to that specific script. Now if it comes to option trading, basic knowledge about the option Greeks are needed. Why? We can be right in our assuption about where the market could go, we even would have the right option like a call for a possible up move, but we still can lose our invested money when market not moves in the right time enough in our direction. Many got confused about that as there seems to be no logic behind it. But there is and what happens, happens because of the option Greeks. The most important option Greeks you have to have an idea about are: Theta, Delta, Gamma, Vega and Rho. All of them play a specific rule when it comes to option pricing. Dear Pratapvb has done some simple posts about those Option Greeks:
Over view about Option Greeks: http://www.traderji.com/options/92743-options-my-way-looking.html#post942004
Theta: http://www.traderji.com/options/92743-options-my-way-looking.html#post942026
Delta: http://www.traderji.com/options/92743-options-my-way-looking.html#post942045
Delta and OTM options: http://www.traderji.com/options/92743-options-my-way-looking.html#post942108
Gammma: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942111
Vega: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942376
Rho: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942377
I posted all those links, so in the future you can use them separately in case you forgot which one of those option Greeks does represent what or stand for.
As we now already have a basic Idea about how option can be traded, I recommend the beginners in option trading to try to write down a little trading plan for there own purposes with the information given until now in this thread. This exercise is needed, as you will need any way a trading plan when you want to start with real money in option trading. Later you can add or remove parts from this basic trading plan. As all noise is filtered out in the post from me about option trading, it should be quit easy for you to make such a little trading plan. For possible TA tools you use the information given from dear XRAY27 and dear Niftyoptions. Keep the trading plan as simple as you can = Only a few TA tools and only a few tools from the option side. If you do not have any idea about what a trading plan should be, kindly read the following template from Tim Wilcox http://www.trade2win.com/media/knowledge/tim-wilcox/T2W_Trading_Plan_Template_2005.pdf (You must have Adobe reader or Foxit reader installed on your system, other wise the link will not work)
Here some links about option pricing:
Understanding Option Pricing: http://www.investopedia.com/articles/optioninvestor/07/options_beat_market.asp
Black and Scholes Model: http://www.optiontradingtips.com/pricing/black-and-scholes.html
Binomial Model: http://www.optiontradingtips.com/pricing/binomial-model.html
Thats it for this time. Take care and enjoy the weekend / Dan
Time for the weekly option lesson.
Until now we have seen a way from dear AW10 how to start with option trading. We also have seen a simple concept from our friend Healthry how to use any script and combine that with the option data we have to that specific script. Now if it comes to option trading, basic knowledge about the option Greeks are needed. Why? We can be right in our assuption about where the market could go, we even would have the right option like a call for a possible up move, but we still can lose our invested money when market not moves in the right time enough in our direction. Many got confused about that as there seems to be no logic behind it. But there is and what happens, happens because of the option Greeks. The most important option Greeks you have to have an idea about are: Theta, Delta, Gamma, Vega and Rho. All of them play a specific rule when it comes to option pricing. Dear Pratapvb has done some simple posts about those Option Greeks:
Over view about Option Greeks: http://www.traderji.com/options/92743-options-my-way-looking.html#post942004
Theta: http://www.traderji.com/options/92743-options-my-way-looking.html#post942026
Delta: http://www.traderji.com/options/92743-options-my-way-looking.html#post942045
Delta and OTM options: http://www.traderji.com/options/92743-options-my-way-looking.html#post942108
Gammma: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942111
Vega: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942376
Rho: http://www.traderji.com/options/92743-options-my-way-looking-2.html#post942377
I posted all those links, so in the future you can use them separately in case you forgot which one of those option Greeks does represent what or stand for.
As we now already have a basic Idea about how option can be traded, I recommend the beginners in option trading to try to write down a little trading plan for there own purposes with the information given until now in this thread. This exercise is needed, as you will need any way a trading plan when you want to start with real money in option trading. Later you can add or remove parts from this basic trading plan. As all noise is filtered out in the post from me about option trading, it should be quit easy for you to make such a little trading plan. For possible TA tools you use the information given from dear XRAY27 and dear Niftyoptions. Keep the trading plan as simple as you can = Only a few TA tools and only a few tools from the option side. If you do not have any idea about what a trading plan should be, kindly read the following template from Tim Wilcox http://www.trade2win.com/media/knowledge/tim-wilcox/T2W_Trading_Plan_Template_2005.pdf (You must have Adobe reader or Foxit reader installed on your system, other wise the link will not work)
Here some links about option pricing:
Understanding Option Pricing: http://www.investopedia.com/articles/optioninvestor/07/options_beat_market.asp
Black and Scholes Model: http://www.optiontradingtips.com/pricing/black-and-scholes.html
Binomial Model: http://www.optiontradingtips.com/pricing/binomial-model.html
Thats it for this time. Take care and enjoy the weekend / Dan
very important thread/s ... to cover options...once i thought to start thread on options... but these thread covers all the concepts of options...
now i can share some of my charts of options trading once people understands whole concepts.......
