Options Trading Pricing: GREEKS (Delta, Theta, Gamma & Vega)


Why I don’t look at IV (implied volatility) and options Greeks. David
Jaffee with BestStockStrategy.com where i earn around a million dollars a year
by trading stock options. You can go to BestStockStrategy.com, enter in your
email address and receive over $400 worth of free training materials that’s
better than anyone elses’ paid materials. Please like, comment, share and subscribe to
this video it helps me help more people and improve their education and it also
helps spread the word so I appreciate that the reason why I don’t look at any
options Greeks such as implied volatility or Delta, I do occasionally look at theta
just more out of curiosity but I also don’t read any research articles like I
don’t go on seekingalpha .com and I don’t read any articles I don’t look at
any of the Greeks that I’m looking at implied volatility and the reason is very
simple all of those metrics are reflected in the current option price
that you will receive by selling that specific strike price so just, as simple
as possible, all of those metrics, the greeks, they are inputs in the price in the
current price of the option that you’re looking to sell so there’s really no
point for me to look at Facebook when it’s trading at $157 and recognize
that it has very high implied volatility when I know that if I just simply look
at the price I can make a determination and actually use my brain and say okay
if I sell this $145 put that expires six weeks from now and I receive $3
dollars per share so therefore my break-even cost is $142, do I think
that I’m being amply compensated for me
to assume that risk of agreeing to buy Facebook at 145 if the answer is yes
then I make that trade if the answer is no and I’m not comfortable with the 145
minus the three dollars in premium that I’m receiving therefore the break-even
point is $142 then I don’t make that trade but it
doesn’t make any sense to me to trade solely based upon high implied
volatility or even to look at the greeks because it’s just like you’re taking
away a lot of the thought process that goes into trading and I think that one
of my main criticisms of tastyworks and Tom Sosnoff and Tony Battista
what’s-his-name that I forgot his name but like Batista
and you know Tom Sosnoff is that sometimes they lose track of their positions
because they trade so many positions just predicated on, Tony Batista, they
lose track of their positions simply predicated upon trading them because
they have high implied volatility but to me not all the opportunities are the
same so for example if facebook falls from $218 all the way down to a $157
which is where it’s trading at right now as of Monday October 8th 2018 I believe
that that represents a much better opportunity when you trade a $500
hundred billion dollar extremely liquid company then if you trade Tesla which
has been everywhere from 420 dollars a share of three weeks ago to 260 dollars
a share and I don’t even know where it’s trading now because it’s not on my watch
list and I don’t I don’t check it but the point is that Tesla might have
higher implied volatility well that’s really weird that’s never happened
before but Tesla might have higher implied volatility right now but that
does not mean that it’s a better opportunity behind Facebook the chances
if you were gonna sell puts on Tesla with a strike price of like 235 you can
collect probably just as much premium selling at 235 put on Tesla let’s say
Tesla’s trading in 265 I have no idea what else is trading I just made that up
I haven’t looked at and like one or two weeks but with Facebook when it’s trading at
157 if I sold that 145 put I believe that the probability that Facebook
trades down to 145 is significantly less than the probability that I Facebook
that Tesla is going to trade down into $235 so when you sort your trading
opportunity solely based upon high implied volatility you are really
doing yourself a disservice because you’re not taking into account the into
account the value of the actual underlying like I believe that Amazon
Facebook and like Lockheed Martin Raytheon JP Morgan those are really
high-quality underlines that are going to have relatively low volatility and
when they’re trading down on the low end of their of the low end of the range of
the trading range that they’ve had over the past few weeks
like when Facebook is trading over the past few weeks from like 157 or 172 and
it starts trading down to around 160 that is an excellent opportunity for you
to sell puts but even though something like Tesla has much higher implied
volatility than Facebook just three weeks ago is trading at 420 and now it’s
turning it around to 60 to 70 I mean that’s so much volatility that you can
be right and you can get scared out of your position if you sold calls and then
Facebook a rather Tesla wouldn’t then suddenly be like 40 or 50 dollars in the
money you would then flip that around and sell puts with a strike price are
like 320 and now you’re probably going to be like 50 or 60 dollars underwater
there’s no point selling indiscriminately based upon high
implied volatility the only reason I look at I look at theta is just because
I’m kind of curious I’m like okay this is cool like for every day that goes by
I’m gonna make like $4,000 in premium decay that makes me feel good right that
means that even if the stock market doesn’t move at all and none of my
securities move I’m gonna make $4,000 just on option premium decay and that’s
why we sell options and we don’t buy options but I definitely don’t look at
any of the deltas I don’t look at the theta numbers besides just that
curiosity I don’t look at the Vega numbers or the implied volatility I
definitely don’t read articles on seekingalpha.com because all you’re
doing when you’re reading those articles is it’s just for entertainment purposes
you’re just seeking validation that the trade that you made is correct I mean
there’s nothing that you’re gonna learn on SeekingAlpha.com that is not publicly
available especially for like on huge like Amazon or Facebook or JPMorgan like
these companies are hundreds of billions of dollars Amazon is a trillion dollar
company there’s nothing that you’re gonna learn on seekingalpha for that’s
going to help you make a better decision all you’re doing is wasting your time so
if you really want to be successful then you’re gonna get shit done you’re gonna
create things and you’re gonna build good habits if you want to act like
you’re busy then you’re going to read bullshit articles on seeking alpha and
you’re gonna try to compete on a knowledge gained meaning like sending
the emails and asking me oh do you look at it implied volatility and Delta like
no fuck that like I focus on maximizing my returns and actually making money
right I don’t try to distract myself with all these Greeks like I don’t even
know what yeah I’m sure that probably 10 or 15 percent of my readers out there
know more about Greeks and I do like I don’t even know like what some of the
Greeks mean that some people tell me but like I don’t give a shit like I worked
as an investment banker and when they would ask me to do with DCF analysis I
remember having to Google how to do it because I only did DCF analysis maybe
like five times in the five or six years that I worked as an investment banker so
it’s like all the stuff that they teach you in college which is super important
then the reality is that you barely use that stuff in the real world so if you
want to sound really smart to your friends and hang out at the bar and like
talk to them and try to make yourself look good by spitting out all this
computational bullshit and citing definitions okay fine do it but if you
actually want to make money then you’re gonna focus on using your brain and
making good decisions and that’s the reason why I don’t read articles on
seekingalpha.com and why I don’t look at higher implied volatility or volatility
I don’t screen things based upon high IV nor do I look at Delta or theta or
anything like that because all of those inputs are reflected in the current
price so this is David Jaffee from BestStockStrategy.com BestStockStrategy.com you can go to BestStockStrategy.com and enter your email merci $400 worth of free training if you
have any questions leave a comment below please like comment share subscribe and
here to help you

12 thoughts on “Options Trading Pricing: GREEKS (Delta, Theta, Gamma & Vega)

  1. Please share this with your friends & subscribe to my channel. I want to be of service to as many people as possible and help them avoid both stress and maximize their returns. Learn a valuable skill and earn ~50% every year (which will make you more successful than 99% of traders!)

  2. David, thanks for this video. Always thirsting for knowledge, I had lately begun to sip some of the "TastyTrade Kool-aid," and wonder how much sense Tom and Tony's strategies made. Your succinct statement that "all the analysis is already built into the option prices" says it all. Tom Sosnoff would (and does) say that in an efficient market, it's all baked into the price, but the method he prefers is to get there by way of the Greeks. To each his own, I guess, but I think I like your method of identifying trade openings better.

  3. Why if you have a lot of money in your own option trade strategy and your are looking to earn money selling yours advices as yours courses? Almost one milion in one year and want to share it for $349? Sounds weird!

  4. Hi David. U hv mention in other videos that u need to be patient and wait for the price to drop to a certain historical level before selling a put option. How do you calculate this safety margin. I don't really look at the Greeks in general but I do look at Delta more than the others.

  5. in the video it is informed that Greeks and imp volatility are not imp, I was also not very clear about it, it is very confusing anyway i will go thru your site then i will come back, i am from INDIA, my email [email protected]

  6. Ya, the college nonsense is a waste. I received my training at the Geneva Finance Research Institute from the University of Geneva and underwritten by UBS – and while it's true, it's also mostly just a bullshit word salad designed to impress the "sophisticated". I glance at the Greeks because every once in a while I spot something odd relative to my trading methodology (and even then, I only bother with my Delta, Theta & Vega), but I've never done a complex trade analysis based upon the Greeks – if anything I'll look at them as an afterthought just for redundant confirmation of my initial thesis. But you're right, a deep knowledge of the Greeks is totally optional (pun intended lol). Nobless oblige… ⚜️.

  7. Back when I was a gambler trader, I considered myself a decent greek manager. It was all about the inventory management in those days. I don't use the greeks much anymore simply because selling puts in a handful of names isn't rocket science to manage. I still do glance at delta though to get a rough idea on probability, but that's about it. And no, I don't chase IV either.

  8. They only reason you can ignore the greeks NOW is because you know them inside out and don't need to rely on them and qickly glance at a particular parameter/greek. But it is foolish to not be educated on the greeks.

  9. You say selling puts at the low end of a range, but what’s your opinion on selling calls at the top end of a range?

  10. "Take a look at the price, see if I am duly compensated, make a determination" – how is it different from using your intuitive judgement? which in itself comes from accumulated knowledge based on studies and experience…
    I don't know if this is the right way to trade options ..

Leave a Reply

Your email address will not be published. Required fields are marked *