Trading options
- Thread starter Adobian
- Start date
For options to trade intraday to overcome the wide bid-ask spread you need conditions in favour of you such as enough price move, or little time value, or enough changes of the volatility. It doesnt work so well with so-so underlying which doesnt have enough of the above changes to overcome the b-a spread. So you have to pick the right underlying.
I bought this book on options, in the last few pages it says that options require high math skills. lol, now they tell me, but its better to spend a couple dollars on a book, then a couple thousand on losing trades.
I dont trade options of course, but i'm curious for those that do, what's a common math problem, or equation that needs to be solved before finding the right calls/ puts?
- nathan
The two most important calculations would be to determine Delta and Gamma.
Delta is the ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative.
Gamma is the rate of change for delta with respect to the underlying asset's price.
Determining these values are the primary objective of the Black Scholes model for pricing options. Measuring interdependent rates of change requires the application of Calculus.
There are lots of software programs that will automate the process for you, however it would probably be a good idea for you to have at least a conceptual understanding of the mechanisms involved before risking any money.
Delta is the ratio comparing the change in the price of the underlying asset to the corresponding change in the price of a derivative.
Gamma is the rate of change for delta with respect to the underlying asset's price.
Determining these values are the primary objective of the Black Scholes model for pricing options. Measuring interdependent rates of change requires the application of Calculus.
There are lots of software programs that will automate the process for you, however it would probably be a good idea for you to have at least a conceptual understanding of the mechanisms involved before risking any money.