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Friday, March 16, 2007

Using of Options Greeks to Trade Options

As discussed earlier, options Greeks provides useful (in fact most import) information about options. Most options trading systems available today provides normalized values for these Greeks. Normalized Greeks are values that are normalized to dollars by multiplying with the contract multiplier (usually 100).

The Delta Greek directly provides the information of profit/loss you can have with rise/fall in price of underlying product by one dollar. Remember that the Delta option Greek for call options is positive and put options is negative. Gamma Greek is always a positive value and can be used to predict option value, by predicting the Delta.

The Theta Greek is important for all types of traders as time is the most powerful deciding factor of the option value. Traders want to own options have to purchase long-term contracts, in other way vice versa. The Vega Greek can be different to different options and affects both call and put options in the same way.

Using of options Greeks may be bit difficult for beginners. But once you understand them and start to use you can benefit a lot from them. Once you master them you can find more profit making chances by combining them with risk graphs and market news.

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