In my opinion the best two detailed books involving Greeks are by Cottle and Natenberg. Not for beginners though but something to shoot for.
The thread below about volume information reminds me the feeling of reading some options books about Greeks (i.e. Option-Sensitivities). "Volume analysis is to be discarded as it is "too much information"" http://www.elitetrader.com/vb/showthread.php?threadid=169124
Certainly. I trade options on the short side continuously. The only greek that I know the meaning of is delta, and I don't use it. They calculate it in my SPAN margin and that's why I know what it is. I've been very successful with options and I don't use greeks. Bottom line: Markets that are volatile will have higher premiums. These are the ones that I want to sell. Thank you for your time-- Ishmael
Yes in two cases - I bought DNDN calls as a spec in 2007 the week before Provenge hit the FDA and made a hell of a nice profit on that Mother of All Short Squeezes. No greeks, just a speculation play, pure and simple. I also sell puts on stock I want to own at a certain price, and don't even look at the greeks for that.
I am going to vote YES,and I do so by the narrowest of margins.. If a trader can find his niche,become very adept at trading it,and have a sound trading plan he really could get by without knowing any greeks... Would it help to have a decent understanding of implied vol and IV vs historical volatility??Most likely,but that doesnt rule out success should one choose to ignore it.. I had the good fortune of running/working on derivative desks at major investment banks from 1983-2002..I was exposed to every ridiculous exotic instrument,and I also met with some of the largest directional traders in the world.One individual that stood out was a directional trader that used options.Not too hedge his risk,but to increase his exposure.He NEVER asked what vol he was buying.never asked what his delta was. He simply needed to know the premium.(Most of the time he traded knock outs). He had a very strong opinion on the direction,and simply needed a derivative that would work within his "probabilty distribution".. Interestingly if the vol was high,he would always say the option was too rich.He didnt look at the vol,but if you know your markets,do you really need to know the volatility of the option? Isnt a percent of spot more than enough?A good trader should have the intuition to know high vol from low vol relative to the underlying.Its not that difficult.. If you are a directional trader,do your homework and come up with sound money management/risk control,I think one could employ options without having a clue to the greeks.
Of course it's possible. That's not the issue. If you care about managing risk; if you want to decrease your chances of going broke, then the Greeks will help you. You are allowed to fly blind. And that appears to be what you prefer to do - and are looking for people to give you permission to do that. Mark
Could it be this person had a rich mental map of how the Greeks affected his position, hence had no need for the numerical values? I rarely refer to the actual numerical value of the Greeks, apart from delta, but I sure as hell know how they affect my position.
What a great, positive and fair comment! http://www.elitetrader.com/vb/showthread.php?s=&threadid=152762
Yes. Options prices go up and down. Just like futures prices, just like stock prices. Greeks certainly add flavor and can help with valuation and risk measures, but you're buying and selling an instrument. Buy low, sell high. Greeks are not necessary, jut a tool. Same as fair value, cost of carry, curvature of the dererred curve and other tools used to determine whether to play the long or short side of futures.
Let me ask you,what good is it to know how it will affect your position?? By the time it affects your position,its too late...If you are managing vol its one thing,but if you are trading directionally its much much different.. I dont believe they have a rich mental map of the Greeks..They do have a very thorough understanding of the markets they trade and the probabilities of success/failure and magnitude of the directional move.. If I gave you a probability distribution of likey price moves,dont you think you would intuitively have a feel for how much you should pay for an option???