Option Greeks - Are they useful or noise?

Option Greeks - Are they useful or noise?

• Gamma
• Theta
• Vega
• Impvol
• Delta

IMO ..... Since the values continuously change based on the stock I find them to be useless. What do you guys use them for?

 

Lol. Is this an April Fools post? Or just your typical ET level post?

 

so what is the answer? Seriously I buy puts and calls based on direction and close to expiration so how relevant are they.

 

I always look at the IV of whatever I'm buying in relation to other expirations to make sure I'm not overpaying. High IV simply means an event is being priced in.

As for Delta, aside from what it tells you, if you buy ITM you get higher absolute returns, OTM gives better precentage returns. DITM might be less liquid depending on the instrument, quoted spreads wider.

The other Greeks become important with spreads, wouldn't dream of trading them without looking at the Greeks.

 

There are a few ways to win with options;

a) always be right on direction of the underlying
b) always be right on direction of volatility
c) be right on both enough to overcome when you're wrong on both equally or separately.

 

If you are holding all your options to expiry, then greeks are not that important. But if your are 'trading' options, they are the most important.

 

"and you are long the option" you might want to add.

 

Correct, long the option. or short an European option.

 

Imagine you are short a European call, price keeps on rising while you are unhedged. Are you sure you do not care about your exposure to the underlying?

 

I am so sorry, I was only thinking of a covered call. Of course you are right.