- Delta, Gamma, Vega and Theta are mathematical analysis tools used, like a barometer, to test the price/time/volatility and sensitivity between the option and the underlying asset.
- Within the totality of all investment classes and vehicles, options contracts offer participant traders the ultimate tools for fine tuning risk/reward.
- By your own mind and intelligent thinking, you are singularly able to divine magnificent financial yield from meager financial beginnings, and that could lead one to believe that anything is possible.
Some of us do it strictly for profit while others are in it purely for the protective edge; whatever side of the divide, we all share in the passion for the limitless potentiality we feel when trading options. The power of your own mind at work is quite intoxicating, albeit daunting experience.
Options Intrigue, Mind Meets Its Match
Whether you are in the commodity options market, or the steadfast equity options trade, the highly seductive allure of this more intricate asset class is mesmerizing, leaving those who fancy this more targeted type of investment in love with the infinite set of possibilities to choose from when attacking risk to earn great profits.
Ardent followers of traditional options marketplace will pay homage to the value of math and science in a most concerted way; implementing an entire sub-language collectively called ‘The Greeks’ devoted to parceling out meaning in the math.
This is quite ironic, given that the earliest traces of options contracts date back to the first Philosopher in recorded history, Thales of Miletus. Another famous Philosopher, Aristotle, reported him to have scoped out an outrageously good olive crop on the horizon of his star charts. It is said he quickly offered money to all the olive press owners in his city in exchange for options on their then dormant presses at predetermined prices and time-periods.
Thales of Miletus
Do not be daunted by these foreign symbols, ‘The Greeks’ are merely letters denoted from that ancient Greek alphabet. Delta, Gamma, Vega and Theta are mathematical analysis tools used, like a barometer, to test the price/time/volatility and sensitivity between the option and the underlying asset.
All of this activity requires advanced analysis and thought, which exemplifies the point that there is something, a certain ‘je ne sais quoi’ as our French friends say, revolving around the concept and trade of options contracts.
Which still leaves us with the why?
We have found that within the totality of all investment classes and vehicles, options contracts offer participant traders the ultimate tools for fine tuning risk/reward; including the incessant option to roll the trade over, stretching the event horizon to suit a more favorable or null return.
This targeted approach to the most fundamental of trading risk allows the participant a sense of freedom and empowerment. Options trading presents a freedom, in that it is a script developed and executed by your own mind. This level of execution provides an enormous sense of empowerment as well.
The thought that by your own mind and intelligent thinking, that you are singularly able to divine magnificent financial yield from meager financial beginnings, could lead one to believe that anything is possible. They would not be wrong in thinking that either.
Enough about these spiritual endeavors, options trading provides significant advantages over direct investments such as the ability to more accurately target risk and time quotients. More importantly, options provide a lower cost/reward outcome. One of the strongest aspects to options trading is how much of the risk-based cost is born by the losing side to the trade. In this fashion, all winners really win, but the flip-side is that losers really lose.
Sometimes, you have to really take a step back and admire the intrinsic beauty of this creation. In this fashion, you can really get a sense of the frame and everything inside. In this little frame, we have identified very nicely with our friend the option contract, a sexy idea that has only become that much more appealing with time.