Whats a good method to remember how the various greeks influence option prices at the money,in the money and out of the money - and all the three in conjuction with “close to expiration and far from expiration” does it help to plug it into BSM and calculate -that would be tedious and almost impossible without knowing N(d1) or N(d2) delta - option price most sensitive to changes in delta at the money,closer to expiration - rho - please help complete vega - vega -more sensitive when further from expiration (right?) theta- gamma- the more the gamma, lesser number of calls needed to hedge (?) thanks

Dsylexic Wrote: ------------------------------------------------------- > Whats a good method to remember how the various > greeks influence option prices at the money,in the > money and out of the money - and all the three > in conjuction with “close to expiration and far > from expiration” > > does it help to plug it into BSM and calculate > -that would be tedious and almost impossible > without knowing N(d1) or N(d2) > > delta - option price most sensitive to changes in > delta at the money,closer to expiration - > rho - please help complete Use put/call parity to see how changing the risk free rate will affect the prices of the put vs the call. > vega - vega -more sensitive when further from > expiration (right?) > theta- > gamma- the more the gamma, lesser number of calls > needed to hedge (?) > > thanks

Mathematica animated graphs. Very cool.

Dsylexic Wrote: ------------------------------------------------------- > Whats a good method to remember how the various > greeks influence option prices at the money,in the > money and out of the money - and all the three > in conjuction with “close to expiration and far > from expiration” > > does it help to plug it into BSM and calculate > -that would be tedious and almost impossible > without knowing N(d1) or N(d2) > > delta - option price most sensitive to changes in > delta at the money,closer to expiration - > rho - please help complete > vega - vega -more sensitive when further from > expiration (right?) > theta- > gamma- the more the gamma, lesser number of calls > needed to hedge (?) > > thanks Theta : Time Volatility

I wouldn’t memorize BSM, it’s much easier just to understand the greeks. Once you understand what they measure, how they react to time to expiration will be second nature. They are really pretty intuitive once you spend some time with it. Rho – Just know that this one barely matters and only has a very small effect on price whether expiration is close or far. Vega - You got this, highest when option is ATM and far from expiration. Theta –Theta is a measure of time decay. Think of it as the same as volatility: the more time left, the more the option is worth. What’s unintuitive about this is that time decay is more rapid as the expiration approaches. Think of it as the difference between 99 days till expiration vs. 2 days and how fast the time value would decay in each circumstance. Like Gamma, it is highest At-the-money. Gamma – This measures the change in delta and it greatest when the option is at the money. Its reaction to change in time depends on if the option is at the money or In-the-money/ out-of-the-money. Gamma will increase for an ATM option as expiration approaches but decreases for options above or below that level as expiration approaches. T/G

Very helpful T/G… thanks