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Options Crash Course

Options Crash Course: Ep #4 - Profit, Direction, and Probability

Options Crash Course

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

To round out the first week of our Options Crash Course, we take a look at option delta - a derivative of the BSM, and the one variable that can measure profit, direction, and probability, simultaneously. Once we understand that the textbook definition of delta shows us how an option’s price will move when the stock price moves, we then turn to understanding how delta measures our directional risk and position probability.

Specifically, delta can show us both the directional exposure of our option position, relative to a pure stock position, and it measures the probability of that specific option expiring ITM at expiration.

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