Part 2/7:
Before diving into strategies for locating lucrative options, it is crucial to understand what informs the pricing of an option. Options premiums are influenced by several key factors, commonly referred to as "the Greeks." These Greeks include Delta, Gamma, Theta, and Vega, which measure different aspects of an option's price sensitivity to changes in underlying securities.
The Greeks: A Breakdown
- Delta: This metric indicates how much an option's price is expected to change when there is a $1 change in the price of the underlying stock. For instance, if a stock like Apple increases by $1, the option's price might increase by approximately $69, given it is multiplied by 100 (since each contract controls 100 shares).