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There is a series of free trading lessons, which consists of 10 topics that traders, both beginners and experienced traders, should find them very useful. The 10 Free Trading Lessons will cover the following topics: (1) The importance of psychology in price movement. (2) How to spot mega trends. (3) Understanding of technical price objectives. (4) How to picture price objectives. (5) How to trade with moving averages. (6) How to use point and figure trading techniques. (7) How to use the RSI indicator. (8) How to correctly use stochastics in your trading. (9) How to use the ADX indicator to capture trends. (10) How to capitalize on natural market cycles. On top of the above, you will learn all about Fibonacci retracements, MACD, Bollinger Bands, and much more.

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Relationship between OPTION GREEK with DEGREE of MONEYNESS, IMPLIED VOLATILITY and TIME TO EXPIRATION: Summary Part 2
Go back to Part 1. THETA Theta is an options greeks that measures of the rate of decline of options timevalue resulting from the passage of time (time decay). Theta provides an estimate of the dollar amount that an option price would lose due to 1 day decrease in the time remaining to expiration, assuming other factors remain constant.

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For your convenience, Ive organized the key articles on trading educational topics in this Theta of ATM, ITM & OTM Option blog in the lists and placed the Theta is typically highest for ATM option, and is progressively declining as an links to these lists on the TOP option moves to ITM or OTM. This makes sense because ATM options have the highest time value component, so LEFT corner under KEY POSTS. I always update the they have more time value to lose over time compared to ITM or OTM options. content lists in these links as and when I write new posts on the Effect of Time Remaining to Expiration on Theta corresponding topics. Happy For ATM option, Theta will be higher as an option is approaching the expiration reading! :-) date. In contrast, for ITM & OTM options, Theta will be lower as an option gets closer to expiration. The above effects are particularly observed in the last few weeks (about 30 days) before the expiration. Impact of Implied Volatility (IV) on Theta When Implied Volatility (IV) decreases, Theta will decrease, especially when it is approaching expiration. On the other hand, when IV increases, Theta would also increase. VEGA Vega measures how sensitive an options price to the changes in Implied
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Volatility (IV). Vega estimates how much an option price will change as a result of 1% change in volatility. A change in IV will have the same effect on both Calls and Puts options: An increase in IV would increase an options price, whereas a decrease in IV will decrease an options price. This is because higher volatility implies greater expected fluctuations in the stock price, which means a greater possibility for an option to move into your favor by
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the expiration date. Vega of ATM, ITM & OTM Option Vega will be the highest for ATM options, and would gradually get lower as options become more ITM and OTM. That means, when there is a change in volatility, the value of ATM option would

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Time Value (13) change the most. This makes sense because ATM option has the highest time value Trading Psychology (9) component, and that the changes in IV will only affect the time value portion of an Trading Quotes/Adages (7) options price. Trading System (8) Trading Videos (37) Types of Orders (22) Volatility Skew / Smile (6)

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Comparing between ITM & OTM options, the impact of volatility changes will be greater for OTM options than it is for ITM options. Effect of Time Remaining to Expiration on Vega Assuming all other things constant, Vega decreases when as time passes (as the option gets closer to the expiration). Vega is relatively higher when there is more time remaining to expiration. This is because options with more time remaining to expiration have larger portion of

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time value, and it is the time value component that will affected by the changes in volatility. Effect of Implied Volatility on Vega Vega will be lower when IV decreases, especially for ITM and OTM options. However, Vega is relatively stable / unchanged for ATM option.

Ive read a few option books. THANKS... This is probably the most comprehensive "greeks" article/book Ive read. Wonderful blog. .. A wonder wealth of knowledge there. Thanks so much for your kindness in publishing it! Thank you very much for the most concise and simplest option intro. Highly recommended. So far, yours is the best blog/site on basic options notes in the web that I have chanced upon.

When the Market Moves, Will You Be R... Peter Navarro Best Price $2.82 or Buy New $15.51

Related Posts: * Option Greeks * Options Trading Basic Part 1 * Options Trading Basic Part 2 * Understanding Implied Volatility (IV) * Understanding Options Time Value * Learning / Understanding Candlestick Charts * Learning Charts Patterns

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1 COMMENT: Learning To Trade Options said... Learning things in Greek way is like knowing the baby steps towards potential gains. While many traders focus on stock prices and trends, options pricing and its unpredictability seems to be a bigger problem. THU RS DAY , 14 JA NUA RY , 20 10

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