Are Delta, Gamma, Theta etc. useful?

Discussion in 'Options' started by Sucker, Nov 29, 2002.

  1. Sucker


    I would like to know from professional individual options traders if they find any good use for the complicated option pricing models, like delta, gamma, theta and others. Thanks.

  2. Yes.
  3. maglia rosa

    maglia rosa Guest

    I agree with the previous poster: yes.

    You have to differentiate between pricing model and the risk parameters. Delta, gamma, theta and vega are not option pricing models. They are risk parameters and help the options trader control risk with respect to different factors.
  4. scalping gamma is one way the greeks are used by the individual option trader.


  5. And it comes recommended by your broker!
  6. Knowing the volatility of the volatility of the volatility of the volatility also helps you.
  7. But it means nothing unless you apply a fast stochastics to it.
  8. Sucker


    O.K. They might help you to have a better grasp on the risk reward aspect of buying or selling an option. However aren't you still supposed to have an opinion about how much and how fast the market will probably move in a given direction?

    I mean, if you have a sense of how volatile the market might become and how much and how long it might move in a given direction, then you will have a good idea of how profitable the option trade might get. On the other hand, if the market is too much volatile and might be setting up for a trendless, long dull phase, then you will have a good idea of how much the option prices will depreciate.

    In the end, it sounds like you will face, more or less, the same dilemnas a futures trader does.

  9. Sucker


    May I ask you how?
  10. Depends.
    #10     Nov 29, 2002