I made my first options trade – exactly 67 days after publishing my first post on options, I made a trade. I sold four covered calls for $2577.67 net premium received.
Delta and gamma are two important “greeks” to understand when learning about options. Delta is an estimate of how a change in price in the underlying security will impact an option’s premium.
Time Decay is theta. It is a theoretical value of the amount by which an options contract could decrease per day if all other variables remained constant.
If you buy to open a position by buying a call or put – you are long an options contract. If you’re long a call or put, you hope to sell the options contract at a higher price – i.e. you’d sell the call or put to close the transaction. If you sell to open a position by selling a call or put – you are short an options contract. If you’re shot a call or put, you hope to buy the options contract at a lower price – i.e. you’d buy the call or put to close the transaction.
Simply stated, when an option expires, it ceases to exist. After expiration, the owner of the option has no rights, and the seller of the option has no obligations. An option holder must decide what to do with their option before the expiration date. According to Investopedia, “the concept of time is at the heart of […]