What Is Delta In Options?

Options Delta Explained | Coffee With Markus | Episode 115

Intro: 0:00
What's Going On In The Markets: 1:23
Trades Markus Is In: 5:38
Options Delta Explained: 19:06
Deep Dive Q&A: 32:28
Q: Is there any Money Management for The Wheel: 33:08
Q: What do the gaps mean?: 33:24
Will there be anything for the next week as it is Thanksgiving week? 34:37
Q: Why Options on PRPL instead of Buying Long? 35:53
Q Should we exit LOW and ACTVI today before close? 38:35
Q: What does it mean to "let profits run?" How does this fit w/ PX Strategy? 42:01
C: 2x delta is the probability that the stock will TOUCH the strike. It's amazing how that works. 44:43

Markets are slightly down today and have been piddling around for most of the week.

Right now, there are 3 things on the minds of traders.

1) This nasty virus and the rise of new cases. Almost 200K new cases were reported yesterday.

2) The 2 new vaccines for the virus. Pfizer and Moderna are seeking emergency authorization from the FDA. If they get emergency authorization approval in the next few weeks, then the first wave of vaccines will go out in late December to priority groups.

Most nonpriority adults likely won't get a vaccine until around Memorial Day. Until then we will likely see a rise in new cases while schools are shutting down.

3) The Stimulus package. There has no real news on this front, and I likely won't have any real news in a while.

The volatility will continue to rise. The DJI is up only 2.5% for the year, and while The SPX has hit record highs is up only 10% for the year.

Option prices are influenced by what is known as "The Greeks." They are:
- Delta: measures how much the option price change if the stock moves $1.
- Gamma: Rate of change of the Delta.
- Theta: measures time decay.
These are just a few examples, but there are more.

For right now I am going to focus on Delta.

Delta is a number between 0-1 that measures how much the price of an option changes if the stock moves by $1.

Let's use this example from MSFT trading at $211.20:
Strike Price Delta Current Price New Price
----------------- -------- --------------------- ----------------
205 (ITM) 0.8 6.92 7.72
210 (ATM) 0.57 3.05 3.62
215 (OTM) 0.27 1.06 1.33

Things You need to know:
- Options that are ITM have a higher delta than options OTM
- Options that are ITM are more expensive
- Options ATM are usually around 0.5
- Put Options have a negative delta -1 & 0
- Rough estimate of the probability of the stock price closing above the strike price.
- Delta is not fixed: Changes as the price changes.
VIDEOS & LINKS REFERENCED IN THIS EPISODE:
The Wheel Playlist:
https://www.youtube.com/playlist?list=PLBa3sAx-Io2mybLLdWtbjTFqK9-BR5SJb
Theta In Options:
https://www.youtube.com/watch?v=kSZWxk3qCZI
Options Trading 101:
https://bit.ly/2V7Nf9T
tastyworks:
http://rockwelltrading.com/tastyworks
Money Management:
https://www.youtube.com/watch?v=aBB1DrRKi4k
Growth Trading vs Income Trading:
https://www.youtube.com/watch?v=7aosZJwQ-kc
Bid Ask Price Explained:
https://www.youtube.com/watch?v=D_Xg6TZjixY
Placing a trade on tastyworks: https://www.youtube.com/watch?v=dTmweBouab4
Rockwell Mugs: https://rockwelltrading.com/store

#OptionsTrading #OptionsDelta #TradingOptions
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Видео What Is Delta In Options? канала Markus Heitkoetter