Option Term Definitions

[Arnie Guitar]

I've read these terms so many times in this forum,
but have been embarrassed to ask what they mean.
For those of you like me, here are the definitions.
I got them from an option calculator, the link to which is;
http://www.888optionsnet.com/calculator/main_advanced.asp
I apologize if this has been posted before.

Delta
Delta represents the ratio of the change in an option’s price to a given change in the price of the underlying asset or instrument. In other words, if the underlying changed by a given amount the option price would change by a fraction (the delta) of that amount.

Gamma
Gamma represents the rate of change of an option’s delta with respect to a change in the price of the underlying assets or instrument. In other words, if the underlying price changed by a given amount the option delta would change by a fraction (the gamma) of that amount.

Theta
Theta represents the rate of change of an option’s price with respect to time. As an option moves closer to expiration the value of Theta increases.

Vega
Vega represents the rate of change of an option’s price with respect to the change in the volatility of the underlying asset or future.

Rho
Rho represents the rate of change of an option’s price with respect to the change in the risk-free interest rate.

Arnie

 

[OTR]

Arnie, great info. 888 is a great resource for learning options. I have some other learning tools and links at my website as well:

http://www.options-trading-resources.com/Explain-Option-Trading.html

I am in the midst of developing a tutorial program in newsletter form. Visitors can sign up for the newsletter at:

http://www.options-trading-resources.com/Best-Way-To-Invest-Money.html#optin

Regards,
Steve
http://www.options-trading-resources.com/EliteTrSig

Option trading information and tools the pros wish they had! A former Chicago Mercantile Exchange employee reviews stock option trading software, books, and web sites and online income opportunity.

 

[nonprophet]

I've read these terms so many times in this forum.
but have been embarrassed to ask what they mean.
For those of you like me, here are the definitions.

A call is an option contract giving the owner the right (but not the obligation) to buy a specified amount of an underlying security at a specified price within a specified time.

A put is an option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specified time.