Every Options Greek (and how to use them) | Options for Beginners

In this video we're going to go through the eight most important Greeks in order of importance for retail traders that way when your strangle flips from bullish to bearish you'll understand the Delta impact when your position Theta flips from positive to negative you'll understand why that happened or when the IV on what was a deep out-of the money strike rapidly Rises you'll be okay because you were prepared for the vama [Music] impact so welcome to the Greeks crash course my name is Jim Schultz I'm going to be leading you through this series through this 10

episode series where what we want to do is we want to look at the Greeks that we as tasty use most of the time that we as tasty use to put our positions and our portfolios in the best possible spot now of course this is going to include the first order Greeks that we're all pretty familiar with but We're also going to dabble into some of the second or third order Greeks that we find to be very very important now in each episode we're going to follow the same sequence we're going to cover four different

things first what is the Greek second how do we primarily use that Greek and then third how do we improve our returns with that Greek and then fourth how do we decrease our risk with that Greek so without further Ado let's dive into episode number one Delta okay So starting off what is Delta well what we're going to do is we're going to attack this thing from two different angles we're going to talk about the mathematical angle the mathematical side of things and we're also going to talk about the intuitive side of things so let's

start with the mathematical explanation well Delta is very simply how an option price will move given a $1 move in the underlying stock price now as options rarely move one for one with A stock what a Delta does is it allows us to approximate how the option price will change given the stock price change so for example if an option has a Delta of 30 that means that the option price is expected to move by 30 cents for every $1 move in the stock if a Delta is 50 then the option price is going to

move you know 50 cents for every $1 move in the stock so mathematically it really is that simple if you want to reach a bit further down the you know learning Curve and take a look at some deeper level mathematics related to Delta you can look at the black shs option pricing model because Delta is the first derivative of the black shs option pricing model with respect to price change so it quite literally shows how is an option price going to change when the underlying stock price changes okay but what about the intuitive side of

things well given these quantitative foundations the intuitive side of things Is actually quite easy it just gives us some sense of how are my options how are my position i s in my options portfolio going to move around as stock prices move around we usually keep it that simple and that clear and that fundamental at Tasty here is where things get pretty interesting this is actually not how we primarily use Delta we actually use Delta in a couple of other ways which brings me to my next point so how do we primarily use Delta Well

in addition to that textbook definition there are two other interpretations of Delta number one Delta can be used as an approximate probability gauge and number two Delta can also be used as a share equivalent to measure your directional bias or your directional exposure now interestingly at tasty trade we actually probably use Delta's textbook definition kind of the standard you know default setting of Delta we probably use that guy the least Instead we use Delta as a probability gauge and Delta as a directional bias measurement at different points in time on trade entry when we're putting

on a brand new position that's when we lean on the probability aspect of Delta when we make adjustments to that position that's when we might use both the probability gauge and the directional bias that Delta provides us but at the portfolio level like when we look bird's eye view 10,000 foot gaze that's usually When we lean on Delta's ability to give us a measurement of directional bias exclusively so for example let's say that I was considering a short put strategy a quick shout out to my second crash course where we talked about strategy management and

we went over short put so make sure you guys give that a look but let's say I'm considering a short put strategy that has a Delta of 30 I know that the approximate probability from that Delta Is 30% that that option will expire in the money now I'm a premium seller I don't want the option to expire in the money I want the option to expire out of the money so I have the inverse of that or a 70% approximately probability of success this is very very useful for me at trade entry now let's say

I have a position on and the Delta is 40 well understanding the directional bias understanding the share equivalent helps me process the fact that this position Is going to feel like owning 40 shares of stock even though the contract is for 100 shares conversely let's say that the Delta was 80 now now I know this is going to feel like 80 shares of stock on a 100 share contract so it's going to feel a whole lot more like the full contract size and the full contract weight I can glean I can gather all of this

from the Delta alone now lastly let's look at this from an overall portfolio standpoint let's say that my Portfolio Deltas were 200 and those Deltas were beta weighted to the Spy that's going to tell me that's going to communicate to me that I effectively have what's going to feel like like 200 shares of spy in My overall portfolio so that gives me kind of a broad Market view of the directional exposure that I have with all of my positions in the aggregate understanding Delta in these different ways man this can really help me make the

right decision at the right Time okay so let's take a look at the return side of things in the world of options somebody once said for every gimme there's a gotcha and Delta's relationship ship with returns man this might represent the most classic gimme gotcha exchange that exists in the marketplace now of course what we're going to cover for the next 30 seconds 60 seconds this is not the only way to generate returns as a premium seller this is not the only way to generate Returns from using options but when we look at Delta's relationship

with returns and credits and premiums this is going to get us off to a good start cedus parabus all other things being equal if you want to generate more returns from Delta one way that you could do that would be to sell bigger Delta options so you would choose 45 over 35 you would choose 40 over 30 the reason why this will generate higher returns is those 45 Delta options They're going to have higher premiums than the 35 Delta options those 40 Delta options they're going to have higher premiums than the 30 Delta options now

this relationship holds true regardless of whether you are on the call side or the put side and to push this idea even a little bit further the reason why this is the case the reason why we see this relationship is don't forget Deltas represent probabilities Deltas represent the probability of expiring in the money So if I sell a 45 Delta option then I only have a pop of 55% whereas if I sell a 35 Delta option I'm going to have a pop up 65% so if I sell that bigger Delta yes I'm going to bring

in higher credits more profit potential the Gimme but I'm also going to have to absorb a lower probability of profit the gotcha okay so lastly let's take a look at the risk side of things let's start by stating the obvious the stock market is random the stock market is unpredictable Nobody knows where prices are going nobody knows which way the market wants to move in a given day or week or month or quarter or year understanding this as option Traders as option sellers it yields a number of advantages to us two of which don't have

anything to do with Delta two of which don't have anything to do with Direction they are Theta and they are Vega and we'll take a look at those in those episodes but getting back to the Delta side of things getting back To Delta's focus on reducing our risk here is the most important thing that you need to pull away control your size whether it's at the individual position level whether it's the overall portfolio level the best thing that you can do to control your risk as it relates to Delta is to make sure that you

are small enough make sure that your Delta is manageable and make sure that you understand what directional exposure you are exposed to which having gone through You know the last five or seven or nine minutes you are starting to become equipped to do just that yes of course we all want to have a bias we all want to play a hunch we all want to be long or we want to be short you know the overall Market or a given stock for a certain time period that's perfectly fine but you need to understand the market

is random the market is unpredictable it might not do what you want it to do so how do you control your Risk in a world like that you do it by staying small how do you stay small you stay small by understanding Delta in all the reasons that we've talked about today so thank you guys very much for tuning in today I am so humbled and I am so appreciative of your time and your attention if you want to share this with one of your Trader buddies that would be absolutely amazing also please consider saving

this episode for future reference when you're trying to you know better Understand directional bias probabilities etc etc and when you guys are ready I will see you in the next episode inside of this Greeks crash course Theta and this guy is going to be all about Theta now next to Delta what we covered in episode number one this is probably the Greek that we use the most often at the position level and the portfolio level so this guy is critically critically important to your Success as a premium selling option Trader now we're going to follow

the same structure that we did in episode one we're going to cover four things what the Greek is how we can use this Greek to improve our returns and how we can use this Greek to decrease our risk so without further Ado let's Dive Right into episode number two Theta okay so what is Theta let's break this thing down in the same way that we did in episode number one with Delta Let's talk about the mathematical side of things and then let's talk about the intuitive side of things mathematically Theta is actually pretty simple it

simply measures how an option price will change with each passing day so what your effectively doing is you are putting a value on the calendar See options are very different from stock in a lot of different ways but one of which is this options have a fixed end point options have an expiration date date and As you get closer and closer and closer to that expiration date the extrinsic value of the option cedus parabus has to go lower and lower and lower that's what Theta is measuring that's what Theta is capturing this process this whole

idea of extrinsic value going lower as you get closer and closer to expiration that is more commonly referred to as time Decay now for those of you that might want to dig even deeper into the mathematics it might be helpful to know A couple of things number one Theta is a first derivative of the black Souls model with respect to time and number two Theta is not a linear function it is dynamic it changes from one day to the next based on a myriad of factors two of which are these number one how much time

you have left in the cycle is very important to determining the actual value the actual you know the increments of theta and how they change from one day to the next but then number two the Mone of the option out of the money options in the money options at the money options all of these guys Decay differently and they possess different amounts of theta all right so now that we have the mathematical foundation in place let's turn to the intuitive side of things and the intuitive explanation of theta is actually pretty straightforward here's a couple

of things that you want to understand number one Theta is represented in Actual dollars so for example if you had a Theta of 03 that would mean that that option is going to Decay by 3 cents per per share with each passing day now remember every contract is 100 shares so you could talk about this on a per share basis three cents or you could talk about this on a per contract basis of $3 typically when we communicate with one another as Traders we opt for the latter referring to a Theta of 03 as actually

three or using kind of the whole per Contract value of theta in our communication with one another but then number two and this might be one the most important things to understand when it comes to Theta the Theta for short options is positive and the Theta for long options is negative put very simply this means that the passage of time helps short options the passage of time hurts long options all right so how do we use Theta well the biggest benefit of theta guys is in its being a Nondirectional metric in the marketplace right as

we talked about back in episode number one when we lay down you know kind of the basic Foundation of Delta this is an unpredictable market right things happen pretty randomly so it can be pretty difficult to predict Direction it can be pretty difficult I.E impossible to predict where a stock might be going next but we can all be pretty sure that tomorrow is Tuesday or next week is the last week of the month Or whatever the case may be so this gives us a ton more control in an otherwise unpredictable Marketplace and also our research

has shown through the various management techniques that we apply to all of our positions that we apply to our entire portfolio that is Way Beyond the scope of this episode or even this entire crash course that we can expect to keep approximately 25% of our daily Theta so now with that number in my back pocket I've got Something I can work with right I've got something that I can use to build out return projections to build out you know risk tolerance you know go back to the first crash of course hey quick shout out to

that little diddy that we dropped last September where we talked about portfolio thetas of 0.1% portfolio thetas of. 3% or whatever the case may be I can use all this to now begin to build a portfolio that's going to make sense to me and my return projections my Return expectations my risk tolerance and all of those things all right so now what everybody really wants to know how do I improve my returns with little old Theta well what we're gonna see here this is very similar to what we saw in episode one with Delta in

fact you could even make the case this is even simpler than what we saw in episode one with Delta if you want to improve your returns with Theta once you understand that Theta effectively represents the Value of each passing day all you have to do is increase the value of each passing day all you have to do is increase your overall portfolio Theta as a premium seller so now the passage of time becomes more and more valuable to you that sounds pretty good good but you might be asking Jim are there any risks associated with

this well I'm really glad you brought that up all right so now how do we decrease our risk with Theta well here the old adage it rings True again there is no gimme without a corresponding gotcha and when it comes to Theta things can actually get a little bit slippery and that's because before we talk about decreasing risk with Theta let's begin by talking about increasing risk witha and to do so I want to start with this important disclaimer more Theta means more risk maybe not directly but indirectly for sure and here's how the primary

way that you are going to build up Theta in your Portfolio is through undefined risk strategies like strangles like short puts like ratio spreads like straddles Etc vertical spreads iron Condors butterflies these are terrific strategies but they're not going to build build up appreciable amounts of theta undefined risk positions are going to do that okay if you have more undefined risk positions on then you are exposed to bigger and bigger swings in p&l now naturally you can mitigate this By being delta neutral by keeping your directional bias in check etc etc but it's important to

understand that by having more undefined risk positions on you are exposed to Wilder swings if you are exposed to Wilder swings then you are exposed to more risk if you are exposed to more risk with Theta there's your gotcha so naturally then if you want to decrease your risk with Theta what you need to do is Target lower Theta amounts at the overall portfolio Level like we talked about in that first crash course you know rather than going for 0.3% or 0.4% you might want to Target 0.1% of total net lake or 0.2% of total

net Lake there is no right or wrong answer this isn't about being right or wrong this isn't about being better or worse it truly is about gimmies and gotas it truly is about figuring out what makes the most sense for you and understanding that if you want more return you have to be willing To accept more risk and if you want to take your risk down with Theta you have to be willing to accept lower return targets all right guys so we made it we have reached the end of episode two on Theta inside of

the Greeks crash course if you wanted to share this episode with one of your Trader friends that would be amazing be sure and save this episode for a future reference and when you are ready I will see you inside of episode number three of the Greeks crash course Where we are going to cover Vega this is episode number three where we are going to cover Vega now we got to be open we got to be honest we got to be transparent here at the outset when it comes to the Delta Theta Vega discussion Vega is

definitely the Third Wheel of those guys but it's still still an important metric so it's worthwhile for us to invest a few minutes to better understand how to utilize this guy and what we're going to do is we're going to Follow the same framework that we have followed for the first two episodes and that we're going to follow for all the episodes inside of this Greeks crash course so without further Ado let's dive head first into episode number three Vega all right so what is Vega well what I want to do here is I want

to break down Vega the same way that we broke down Delta and we broke down Theta let's explain this guy from a mathematical angle and then an intuitive angle so Mathematically Vega is a first derivative of the black shs option pricing model it is the first derivative with respect to volatility in other words it's going to show us exactly how a change in volatility will impact the resulting option price that's it pretty simple and pretty straightforward and from a mathematical standpoint regarding the math that's pretty much all we need to know to move right into

the intuition okay so intuitively the conversation Regarding Vega is actually going to be very similar to the one that we had regarding Theta but before we get into the specifics let's first understand that volatility has a special relationship with option prices that we have to be aware of when volatility Rises setus parabus option prices will also rise when volatility Falls option prices will also fall so now let's take that idea and let's translate that into long options versus short options if I'm Long an option I'm going to be positive Vega what that means intuitively is

I want volatility to rise I want volatility to expand I want this to happen because that expansion will lift the option price of the option that I bought this is a positive outcome for me conversely if I'm short options I'm going to be negative Vega so I'm actually going to want volatility to fall I'm actually going to want volatility to contract I want volatility To contract because that will send the option price lower of the option that I have sold and I eventually have to buy back intuitively this is basically the extent of how we

use Vega and its relationship to individual options but it's also important to recognize two additional things that are noteworthy number one Vega is higher for at the money options relative to in the money options or out of the money options and Vega is also higher for longer term Options relative to Shorter term options all right so how do we use Vega well to begin this discussion it's really helpful to remember that how we process things at the portfolio level is different from how we process things at the position level and we kind of saw this

take shape in episode one with Delta and episode two with Theta what's different about the discussion here with Vega is Delta and Theta we used both of those Greeks on both of the different Levels we used Delta and Theta at the portfolio level and at the position level when it comes to Vega we really only look at Vega at the portfolio level if we look at it at all and here's what I mean by that in the early days of tast we paid a lot more attention to portfolio Vega we tried to optimize our Vega

we try to keep it within certain ratios and certain limits relative to other Greeks like Delta or Theta but as we've grown and we've learned and we've Adapted based on our own experiences based on our own understanding of the markets based on our own research and our empirical results what we've come to realize is this we don't need to actively monitor portfolio Vega anymore if our portfolio Delta and our portfolio Theta are in line and on top Target with what we're trying to achieve then portfolio Vega just naturally takes care of itself but to bring

this whole point you know full circle in terms of how we Use portfolio Vega at Tasty it plays much more of a support role than it does a lead role all right so how do we use Vega to increase our returns well rather than focus on how Vega increases our returns I'm actually going to focus on how Vega impacts our returns now I recognize that that might be a little bit misleading but hey guys we are already committed to this subtitle series inside of this crash course of increasing returns and There's just no turning back

when it comes to option profitability it's very important that we all recognize that there are only three ways to make money when you buy or sell options Delta Theta or Vega okay now of those three Delta Theta and Vega Vega is by far in aw the most hidden of those three it's never as clear as Delta it's never as obvious as Theta but it is always there and it's always kind of working behind the scenes all right now that we understand that Let's move one step forward the market just as a whole is usually in

a state of contraction volatility contraction 80 to 85% of the time the volatility in the marketplace is indeed Contracting okay we are option sellers at the core we are option sellers most of the time remember when I sell an option I'm negative Vega what does it mean if I'm negative Vega it means that I want volatility to go down I want volatility to contract so this is definitely going to help my Returns in the long run however as we're all well aware of now being three episodes into this crash course every gimme has a got

and that whole volatility contraction business that's a pretty decent Siz gimme so you might be wondering Jim is there an equally sized gotcha just lurking in the shadows yes there is the market is normally Contracting the market does usually contract which helps us a lot there's your gimme but it Doesn't always contract it's not always just perpetually in this state of volatility decrease volatility can increase too volatility can expand as well and sometimes this expansion happens quickly sometimes this expansion happens quickly and forcefully and that situation can put us premium sellers short Vega holders in

a bit of a bind the gotcha so that brings me to our next section all right so how do we reduce our risk exposure with Vega well this One guys this is going to be the easiest segment that we've had thus far in inside the Greeks crash course and this is why you've already done it you are already in the process of mitigating your risk exposure by way of Vega and specifically what I mean is this if you've been following along with what we've doing as I've already mentioned just a few minutes ago if your

Delta is in check as we've talked about in this crash course and previous crash courses Then you are on the right track if your Theta numbers at the portfolio level are in check and on target like we've talked about in this crash course and previous crash courses then you are on the right track if both of these things are already taken care of you don't have to actively monitor your portfolio Vega numbers at all they are going to take care of themselves they are going to naturally mitigate your risk Levels by way of Delta and

Theta at the portfolio Level and just like that guys we are done with episode number three inside of the the Greeks crash course all about Vega be sure to share this episode with one of your Trader friends be sure to save it for yourself for a future reference and then whenever you are ready I will see you inside of episode number four of the Greeks crash course gamma this is where things start to get a little slippery like we've moved beyond the first order Greeks your Deltas your thetas your Vegas we're now going to crack

into those second and third order Greeks kicking things off here with gamma all right so what is gamma well let's break down the what it is segment into the same two parts that we've been using all throughout the crash course to this point let's talk about the mathematical side of things and let's talk about the intuitive side of things so mathematically gamma is fairly straightforward it is a second Derivative of the black shs option pricing model it is the second derivative of the black actual option pricing model first with respect to price and then second

with respect to price again so effectively what it tries to measure is the change of a change just in a general sense in a more specific sense it measures how Delta changes because remember guys Delta is the first derivative of the black Souls option pricing model with respect to Price so gamma is the change of Delta okay so now that we have a mathematical basis what about the intuitive side of gamma well this one is going to kind of be a lot to digest so try to stay with me here for the next couple of

minutes but in just a general sense if we were to think of like a car that's already moving that movement of the car is basically measured by two different things the speed of the car and the acceleration of the car well if we take That idea and we translate it back into an options context to a Greek's context the Delta would be the speed of the car the gamma would be the acceleration of the car so it's measuring how the speed changes it's measuring how the Delta changes all right so now that we have a

at least a loose grasp on the intuitive understanding of gamma here's the next very important element that you want to add to your foundation the magnitude of gamma is not Nearly as important as simp understanding the sign of gamma and all that that entails now I'm going to unpack a lot more behind why this is the case in the next few minutes but let's begin by building our foundation by understanding the sign of gamma is what really matters now similar to Vega long options have positive gamma and short options have negative gamma a pretty simple

concept to understand and it sounds easy enough But the positive and negative gamas and what they actually mean what they actually represent are anything but easy if you have a long option with positive gamma what that means or what that begins to mean is that your Delta is going to change in the same direction as the stock price movement if you have a short option or negative gamma that means that your Delta is going to change in the opposite direction of the stock price movement okay now that probably Doesn't make a ton of sense yet

so let's work through a couple of examples first off let's say he had a long call very simple bullish strategy this is going to be positive gamma here is what that means if the stock were to Rally what you want to have happen your Deltas will actually increase if the stock were to go down what you don't want to have happen your Deltas will actually decrease in other words if the strategy works right bullish strategy the stock Goes higher your Deltas will strengthen but if the strategy doesn't work right bullish strategy stock goes lower your

Deltas will actually weaken now conversely let's say you had a short call on this is going to be a negative gamma position here is what that means if you have a short call on this is a bearish strategy well what happens if the stock rallies if the stock rallies your Deltas are actually going to go down but since this is a bearish Strategy with a short call those Deltas are negative so they're going to become more negative which is going to make you even more bearish but what if the stock actually goes down on your

short call this is what you want to have happen where your Deltas are actually going to increase or in this case since it's a negative number they're going to become less negative which means you are less bearish okay now those two simple examples believe it or not a long call And a short short call they can be extrapolated out to any long option strategy and any short option strategy so that's the good news right the principles that we learned with long calls and short calls in relation to positive gamma and negative gamma are going to

be the same for any long option strategy and any short option strategy whenever you buy premium you're going to be positive gamma whenever you sell premium you're going to be negative Gamma now as tasty to focus primarily on selling premium we are almost always going to be negative gamma so that means that our directional biases can strengthen they can weaken they can flip over from one side to the other where we were bullish but now maybe we're bearish in a strategy like a strangle because of negative gamma now the last piece to this is remember

all the protocols all the mechanics all the adjustments all the defending losers and managing Winners that that we put in place in the strategy management crash course that we released a couple of months ago that all starts that all centers around this idea this awareness of negative gamma and the consequences and implications of what that means all right so what about increasing returns well gamma is a very interesting Greek because there are many traders in the marketplace that actually do try to use gamma to increase their returns through a process That is often times referred

to as gamma scalping now the idea behind gamma scalping usually relates to Long options so positive gamma and it's a situation where a Trader tries to capitalize on the times when they are right directionally and they let that positive gamma continue to build up and work in their favor at tast however we actually believe wholeheartedly in a market That Is Random in a market that is unpredictable so that's not typically a Strategy that we like to employ we actually prefer to take the other side of that trade in a process that some might call reverse

gamma scalping so rather than try to be right directionally rather than try to pile on you know in those times when we happen to nail a directional move we actually prefer to lessen the impact of Direction and place a greater emphasis on Vega and Theta these non-directional metrics these non-directional elements this is What reverse gamma scalping actually looks like without getting into all the details because that is Way Beyond the scope of what we're trying to do here but the most important thing about this section inside of this episode is this we don't really focus

on gamma too much in regards to improving our returns we focus on gamma in regards to controlling our risk which brings us to our next Point okay so what about decreasing risk with gamma well this is where our Approach to gamma our approach to this Greek and our proprietary management techniques this is where these guys really begin to shine first off let's make sure that we all understand that undefined risk strategies are the best way forward to consistency consistency with results consistency with profitability consistency in a number of different ways it's that pure unfiltered exposure

to the Greeks that's going to allow you to achieve those consistent Results so that would be a gimme as some might say well you might naturally Be Wondering our Jim where's the gacha well it's right here when you have undefined risk strategies on you are naturally exposed to unlimited potential losses unlimited potential losses in way of directional moves unlimited potential losses in way of implied volatility changes so a pretty sizable gotcha now to mitigate this we want to start by understanding and recognizing gamma's Natural drift gamma moves higher the closer to expiration you get it

doesn't matter what the stock is it doesn't matter what the strategy is it doesn't even matter what the specific moneyness of the option is you know at the money out of the money in the money this is how gamma just naturally wants to move so we combat this we mitigate this risk by managing all of our undefined risk positions at 21 days to go doing this it puts a natural cap it puts a natural Ceiling on just how high gamma can really go and so what this does for us is it allows us to better

control our directional risk without having to monitor the exact magnitude of gamma as we referenced earlier not to mention our research has actually shown a very interesting finding most of the big outlier moves most of the big outlier losses that have occurred in the marketplace in the last 15 years most of these guys have occurred in the second Half of the expiration cycle that means inside of 21 days to go now you might see that and at first glance you might think oh that's just a coincidence but if you stop and think about it a

little bit it makes mathem radical sense because at the end of an option's life as you get closer and closer to expiration this is when everything gets heightened this is when all the Greeks begin to grow in magnitude including gamma so seeing a situation where most Of the big losses occur in the second half of the cycle it actually makes mathematical sense and we can avoid some of those at least by simply managing at 21 days to go wow guys believe it or not but we are now at the end of episode 4 gamma this

guy is over this guy is done with this guy's in the rear view mirror so if you want to do us a favor and share this video with one of your Trader friends that would really help us out and make sure that you save this episode For future reference and then when you guys are ready I will see you in episode number five where we are going to talk about the Greek that gets no love Row the Greek they gets no love the Greek that gets no respect row when you got your Deltas you got

your thetas you got your Vegas you got your gamas and then you've got lonely little row that nobody pays attention to well there's actually a reason for that and that is why this episode by far is going to be The shortest one inside of the crash course but still we have to pay it its due let's cover it across four different dimensions what the Greek is how we primarily use it how we can use use it to increase our returns and how we can use it to reduce our risk so without further Ado let's dive

head first into episode number five of the Greeks crash course row all right so what is row well let's hit this guy from the same two angles that we've been hitting all these Greeks from let's cover this guy from the mathematical side and then let's cover this guy from the intuitive side so mathematically row is a first derivative of the black schs model with respect to interest rates so what it is going to show us is when the risk-free rate in the marketplace changes how is that going to impact option prices that's it all right

so what about the intuitive side of row well believe it or not there's really nothing there like Believe it or not there really is no intuition that we can readily utilize when it comes to row and the reason why is this you go back to Delta you've got directional bias you've got probability you go to Theta you've got the value of each passing day you go to Vega even and you have this natural relationship between Market volatility and option prices but then you get to row and none of that is there then you get to

row and all that just kind of disappears like Sure we could whip up some textbook scenario just for Giggles but that's not going to have any connection to real situations real trades and real probabilities and the reason why brings me into our next section all right so how do we use row well here's the reason why there is no intuition behind row because we don't use row at Taste at all in five and a half years as a Trader and a show host on the network I have not once logged into my platform thinking Man

I really hope my row is in check like man I got to see if I need to hedge off some of this row risk like no that is not something that ever happens so so it's not something that we have to worry about in the least next to Delta next to Theta next to Vega next to gamma row should command exactly 0% of your attention Okay so how do we use row to improve our returns well guys to stick with the theme today we're not going to worry about using row to increase our Returns because

we're not going to worry about row at all now naturally you might be thinking Jim that's not enough man I need a little bit more from you I came to video today hoping to be enlightened behind row and this Greek and how I could use this guy to make me a better Trader so you got to give me a little bit more than that all right we are general practitioner retail Traders right we are trading a myriad of products across all different markets We're using strategies here we're using strategies there if we were focused exclusively

like 100% on a fixed income portfolio you know only Trad tring your tlts only trading your zbs only trading your ZN then maybe we should focus on row a little bit more but for us as kind of these overarching kind of you know jack of all trades Traders it just doesn't make a lot of sense so what about row and decreasing risk well if you've made it this far in the video If You haven't clicked off yet then you already know what I'm going to say for us this is a non-event but to push a

little bit further to go beyond your tlts and your zbs and your ZN and your fixed income portfolios the reason why this doesn't matter to us is because any changes to interest rates or any anticipated changes to interest rates they're going to be so small they're going to be so tiny that they are effectively inconsequential now if this Were the 70s right back when Tom was in his early 30s and mortgage rates were you know 12% or 15% or whatever they were then that's a totally different environment and if we ever get back to that

state then I will come back and I will update this video forth with but for right now in the world that we live in this low interest rate environment that we've been in for quite some time that we are in right now and that we will that we will likely be in Indefinitely moving out into the future it just doesn't make any sense to pay a ton of attention to row now some of you maybe all of you are likely wondering Jim why would you even bother to make this video about row when you basically

just deflected for five straight minutes like why even go through the process of putting this in the crash course I'll give you one word completeness as you learn about the world of options if you're brand new to The world of options man my heart goes out to you guys that are just starting out you are diving head first into the deep end of the pool and you may not even realize it you are going to be inundated with information you are going to be bombarded and blasted with ideas and Concepts and strategies and this and

that and sooner or later this little guy row is going to show up on your doorstep sooner or later you're going to learn about or read about or hear about this Guy row and you're going to wonder hey do I need to focus on this like do I need to spend any attention learning about this do I need to invest in figuring out all the things there is or are to figure out in regards to like is this going to make me a better Trader and the answer is no these five minutes even if they've

been the first five minutes that you've spent on this Greek they need to be the last five minutes that you spend on this Greek until Further notice all right so you guys made it through episode five of the Greeks crash course even given the non-event that it was and when you guys are ready I will see you in episode number six where things are going to get a little crazy where we're going to talk about about charm I'm going to try not to sensationalize this guy too much I kind of want to lead you guys

astray with hyperbole but these next eight minutes They might completely change the way that you view trading specifically your strike selection charm really is a total Game Changer now all right let's unpack charm in the same way that we've unpacked all the Greeks to this point let's do this guy across four different dimensions what the Greek is how we primarily use the Greek how it impacts returns and how it impacts risks now all right without further Ado let's Dive Right In to Episode number six of the Greek scratch course charm all right so what is

charm well let's answer that question in the same way that we've already answered that question with the previous five Greeks let's do it mathematically and then let's do it intuitively so mathematically charm is another second derivative of the black shs option pricing model it's the same as gamma in that regard gamma was also a second derivative of the black Souls option Pricing model now with gamma we differentiated the model with respect to price and then again with respect to price what charm does is it shares Delta as that first layer if you will but then

it differentiates the model with respect to time so the first differentiation is with respect to price the second differentiation is with respect to time so what charm effectively measures is how does Delta itself change over time okay so that's the mathematical side of Charm but what about the intuitive side of charm well this is where the magical properties of this Greek really begin to shine all right so charm measures how Delta changes over time but if we push that a little bit further if we explore that a little bit more deeply here is what we're

going to find out of the money options and in the money options typically have stronger charms whereas at the money options have weaker charms now here's what that means if I an outof The money strategy then those Deltas are going to Decay more quickly those Deltas are going to move towards zero more quickly whereas if I an in the money strategy those Deltas are going to strengthen more quickly those Deltas are going to move towards 100 more quickly because they have stronger charms on the out of the money side on the in the money side

at the money options typically have weaker charms they cling on to their Deltas for a longer period Of time those Deltas don't Decay like they might if they were out of the money or strengthen like they might if they were in the money okay if I'm a premium seller those out of the- money Delta decays now I'm really interesting because lower Delta options typically carry what lower extrinsic values so as the Deltas move down because of charm the extrinsic values are going to move down because of charm and now as a premium seller I've got

something that I Can work with so how do we use charm well to be honest charm even with all its incredibleness is not as utilized as some of the other Greeks that we might use on a fairly regular basis like your deltas and your thetas and your Vegas and that makes sense because with Delta with Theta with Vega with even gamma there's a lot more of a tangible impact on those Greeks whereas charm is kind of something that's working more in the backdrop it's kind of something that's Working more in the background but still understanding

its existence understanding its impact it can allow you to better Screen through your strategies to better filter through your strategies so that you can select strikes so that you can select strategies and you can understand the gimmies and the goes of those guys so you end up with something that is customized for the risk return profile that you yourself are trying to achieve Based on your risk tolerance your return projections your experience level Etc so charm can be a very valuable thing in understanding kind of this customization process all right so how can we use

charm to improve our returns well charm's relationship with returns is going to very much be what we've already outlined you move further out of the money with your strike selection the Deltas on those strikes Decay more quickly because the Deltas on those Strikes Decay more quickly the extrinsic value on those strikes on those options decays more quickly and as a result you are left achieving faster relative returns for example if you sell a 10 Delta put that's going to Decay a lot more quickly than a 20 Delta put centerus parabus you sell a 20 Delta

strangle that's going to Decay more quickly than a 30 Delta strangle setus parabus this is a positive thing this is a good thing this is a gimme if you will But before you go out selling three Delta strangles to maximize your charm because hey Jim told me so let's make sure we understand the risks let's make sure we explore the tradeoff let's make sure we understand the gotcha that's right around the corner okay so what about charm's relationship with risk well to be honest it's not as obvious as it might be with some of the

other higher order Greeks like Coler and like V two of the guys that we're going to See in the next two episodes of the Greeks crash course but still we do know this if you go further out of the money in an effort to maximize your charm you are going to have less risk on a per contract basis the problem is this those lower Delta strikes those further out-of- the money options they're going to have lower premiums so what are you very likely going to do what are you very likely going to consider at least

adding more contracts upping your trade Size to give the trade to give the position more economic significance in doing so you will be taking on more risk you will be taking on more risk that you might not even realize that you are taking on I.E episode number eight of this crash course when we take a look at vama so the most important thing to pull away right now is there's something there there's something powerful that's there with charm but we don't want to just go Hog Wild selling these three Delta strangles until we take some

time to understand those higher order Greeks until we take some time to understand these next level gachas that are absolutely there and just like that guys we are done with episode 6 the second half of the Greeks crash course is now fully underway and when you are ready I will see you in episode number seven where we are going to talk about color we are going to cover another higher order of Greek Color now color is another one of those guys that it doesn't really get the Press time it doesn't really get the time in

the spotlight that some of the other Greeks get but as we're going to see here today it is critically important to what we do let's follow the same sequence that we have followed for all the Greeks up to this point let's talk about what color is let's talk about how we use color then let's talk about color and return and lastly let's Talk about color and risk so without further Ado let's right into episode number seven color so what is color guys let's not reinvent the wheel here let's cover this thing mathematically then let's cover

it intuitively so mathematically color is another derivative of the black shs option pricing model but this time it's not a first derivative it's not even a second derivative color is a third derivative so we are going to go down to a brand New layer of the onion here today specifically color is a d derivative of the black Souls option pricing model first with respect to price second with respect to price and then third with respect to time so it's price price time now you might remember that there's another Greek that we've already covered I.E gamma

that is price than price so if you think about colar it's essentially the derivative of gamma with respect to time okay so there is the math what does That actually mean like how can we actually use that well here we go color measures how gamma changes as time passes so in a sense it's very similar to Theta or very similar to charm because Theta measures how option prices change as time passes charm measures how Delta values change as time passes and color simply measures gamma as the variable in question how does it change as time

passes and here is the most important part the most important thing To the whole operation that is color the mathematical nature of this Greek shows us the following as options get closer and closer to expiration as options March closer and closer to that third Friday in expiration month here is what we know gamas get more potent gamas get stronger it doesn't matter if they're positive it doesn't matter if they're negative does this ring a bell it should if it doesn't that's okay just hang with me for the next few minutes And it's going to be

ringing loud and clear okay so how do we use color well it's very similar to the other higher order Greek that we just covered in the last episode of the Greek scratch course when we look at Charm color it's not really something that we actively measure inside of our portfolios at least not consciously like we don't open up our platform wondering how our port portfolio's color is doing you know looking to measure or monitor a Position's color that's not really how we use this Greek now interestingly though as I kind of snuck in that little

consciously on y'all a couple of seconds ago we do use this all the time we lean on the spirit of this Greek on a pretty regular basis now we call it something else like it goes by a different name but we are using Color all along and we'll come back to this in just a couple of minutes okay so what about color impact on returns well for us this is Basically going to be a non-event not like a row nonevent there's a little bit more to it than that but it's going to be a nonevent

nevertheless and the reason why is this remember the base of color is gamma how do we view gamma how do we trade gamma it's kind of a trick question we don't trade gamma at tast remember back in episode number four when we looked at Gamma directly we talked about Gamma scalping we talked about how some Traders like to piggyback Off of exploding gamma late in an expiration cycle to nail those directional moves to really maximize their returns in the times when they're able to get the directional moves correct we don't do that if anything we

do the opposite right we reverse gamma scalp so when it comes to color impact on returns it's the same as gamma's impact on returns we're not using gamma to maximize returns we're using gamma to minimize risk so we're not going to use Color to maximize returns we're going to use color to minimize risk which brings us to our final section today okay so what about color's impact on risk well if you haven't figured it out yet here is what we've been hinting at for the last couple of minutes color shows us how gamma changes over

time color shows us that gamma gets stronger over time in other words color is gamma risk I inhorn is fle and fle is Einhorn so in the end we might not be actively looking at Color but we use it every single time we adjust a position at 21 days to go right we might not be derivating the black Souls option pricing model you know once and then twice and then Thrice to see what comes out but we are using Color every single time we close a position early so that we don't get too close to

expiration Friday that my friends is all because of color all right so you made it to the end of episode seven inside of the Greeks crash course where you are Now a color expert if you want to share this episode with one of your Trader friends that would help us out a ton if you want to save this for yourself for a future reference that's probably also a pretty good idea and when you are ready I will see you inside of episode 8 where we are going to cover V and things are going to start

to come together a Surefire crowd pleaser the life of every party V do you guys remember how a Couple of episodes back when we talked about charm I said hey yall might want to wait before he start selling those low Delta strategies to maximize your charm well the reason why is what you're about to learn with vom okay so what is V well let's do this the only way that we know how mathematically and intuitively so mathematics V is another higher order Greek but it's going to be a little bit of a downtick from what

we saw in episode 7 with color Which was a third derivative vama is actually in the same boat as charm or gamma where it is only a second order derivative and what it measures is it measures the change of Vega when volatility changes so remember that Vega measures the change of option prices when volatility changes vama measures the change of of Vega itself when implied volatility changes okay so what about the intuitive side of V well to make things a little bit easier vama Actually shares the same relationship with options that Vega did remember when

you're long options you are positive Vega well when you are long options you are also positive V when you're short options you are negative Vega when you're short options you're a negative vama but that positive negativeness to vama really only depends on which side of the market you're on the most important thing for you to pull away from vama is that it is a positive Function now what does that mean in English it's actually not too difficult to understand cedus parabus if implied volatility expands then Vega is going to expand because vama is a positive

function cedus parabus if implied volatility contracts then Vega is going to contract because vama is a positive function function now does this mean that all vas are created equally no absolutely not as we are going to see in the next couple of minutes so how do we Use vama as you've maybe noticed to this point you know with charm and then colar and out here V these higher order Greeks they're not usually front and center on our Radars we don't typically use these guys super actively but if you dig a little bit deeper here's what

you will find all of the mechanics all of the protocols all of the things that we do every single day yes we built these things from experience yes we built these things from Empirical research but All along there's been mathematics that have been driving the train there's been mathematics that have been the foundation of what we do and with vama we're going to see the exact same thing in the next two and a half minutes so how do we use vama to improve our returns well you know what interesting about these higher order Greeks at

least the way that we view them and use them very often times they either end up helping you on the return side or the Risk side not usually both like if we go back to charm right that was more of a return metric if we go back to colar just in the most recent episode that was more of a risk metric we're going to see the same thing here with vama it's also going to be a risk metric and the reason why that is the case is because vama by definition measures how changes in implied

volatility and the speed of those changes are going to impact us now naturally there is going to be a return Element to vama like there is going to be a role that vama plays in determining our returns because Vega impacts our returns through implied volatility which implied volatility of course is one of the ways that we make or lose money as option Traders but we're not super interested or concerned with the return side of vama and the reason why is this remember vama gives us insight into the speed of change of implied volatility vama gives

us insight into the risks That we have that are associated with the speed of change in implied volatility and our game when it comes to fast movements when it comes to Quick changes in the marketplace we are more concerned with that on the risk side of the equation not the return side of the equation we're not super interested in making money very quickly that's not our game instead we want to use vama as a risk metric to help Shield us from the big outlier losses to help protect us From these big outlier moves so vama

in our eyes is very much more of a risk metric so that brings us to our final section okay so what about vama and risk well again as premium sellers right it's always going to be these big outlier moves that we need to navigate in order to be successful and so vama is going to help us do that it doesn't really impact us too much on the return side but it can play a big role on the risk side and here's how first off I think it maybe Goes without saying but just in case we

much prefer lower vama this is because lower vas allow us to better control and mitigate and contain the speed of those changes in implied volatility okay secondly vama tends to Peak right right around the five to 10 Delta options so remember vama is always a positive function but there are layers there are levels to the magnitude of vama across the different strikes across the different Deltas okay lastly because Vama Peaks for these lower Delta options this is why we typically don't prefer to sell these lower Delta options even though the charm is super high even

though the charm can be maximized at the five Delta or the seven Delta or even like the 9 or 10 Delta we would much prefer to sneak into the 16 or 20 Delta options with much lower vama and still plenty of charm that we can capture and just like that episode8 is in the books on vama that is it and when you are Ready I will see you in the pen ultimate episode episode number nine where we are going to cover Vana we are going to cover another one of our higher order Greeks Vanna this

guy's going to be similar to you know your charms your colors your vas and so hang tight buckle up because things might get a little bumpy for these next few minutes okay so what is Vana well guys we're Nine episodes in at this point like you know what's coming next we're Going to do this mathematically we're going to do this intuitively so math mathematically Vana is another higher order Greek it is a second order Greek of the black schs option pricing model and what it shows us is how does Delta change when implied volatility changes

how do changes in volatility impact Delta so in a lot of ways it's similar to charm because remember charm showed us how Delta was impacted over time so here van is going to show us how is Delta impacted when volatility changes so it's just gives us another unique perspective of this directional metric that we use all the time which is Delta okay so what about the intuitive side of the explanation well a lot of times when you break things down mathematically and then intuitively the intuitive explanation is often times easier to understand than the mathematical

explanation well that is not necessarily the case here with Vana and here is why If we view things from the long side of the option contract only here is where we want to start long calls have positive Vana long puts have negative Vana now here's what that means if implied volatility Rises it's going to send the Deltas on a long call higher positive Vana if implied volatility Rises it's going to send the Deltas on a long put lower negative Vana now on the surface it might look like those are two different things but the really

the same Thing and here's why okay long calls positive Ana long puts negative Ana let's start with the long calls I have a long call implied volatility spikes the Deltas on that long call are also going to move higher because of the positive Vana this is because greater implied volatility that literally means greater fluctuations in the marketplace if there are greater fluctuations in the marketplace there is now a greater likelihood that that long call might Expire in the money do you remember how back in episode number one we talked about Delta and we talked about

how we can use Delta to gauge the approximate probability of the option expiring in the money that's really helpful here to help us understand Vanna's impact I have a long call with 20 Deltas IV spikes it might move to 30 Deltas I have a long call with 35 Deltas IV spikes it might move to 45 Deltas now similarly long puts basically follow the same logic Chain long puts have negative Vana but here's how it works I have a long put that has -20 Deltas implied volatility spikes the negative Vana is going to send those Deltas

down to Min -30 or I have a long put at minus 35 Deltas implied volatility spikes the negative Vana is going to send that Delta down to minus 45 so mathematically my Delta has decreased but magnitud inally the likelihood that my put expires in the money that has grown and that's the most Important part of Ana that we want to understand right now now naturally you might be asking Jim you're focusing on the long side what about us as premium sellers what about the short side well we'll come back to that in a couple of

minutes okay so how do we use Vana well you guys probably know what I'm going to say here very similar to the other higher order Greeks like your charms like your vas like your colors like your speeds that we're going to see in the Final episode of the Greeks crash course this is not something that we actively monitor like we don't have Vana Hedges just waiting at the ready to go off if things get crazy our Vana kind of gets reconciled through all the other things that we do through all the Frontline activities that we

deploy and all the protocols that we follow and so understanding what Vana is doing behind the scenes is extremely important to understanding what you've signed up for All the gimmies and all all the gotas but in terms of actively monitoring Vana it's not really something that we need to do as you guys are going to see in about uh 45 seconds or so okay so what about Vanna and increasing returns well to answer that question let's now complete the discussion that we started a few minutes ago when we were looking at the long only side

of the option contract long calls have positive Vana but short puts also have positive Vana And the reason why that works out as such is the following puts naturally have negative Ana but if you step in and sell that put then you then become positive V and the way this works is the same way it works when you multiply two negative numbers together you multiply two negative numbers together it brings you back to a positive number so you take a naturally negative vaned put and you sell that put and you actually end up with positive

Vana so now that we Know that short puts are long Vana here's how this imp impacts returns short puts are naturally going to be three things they're going to be long Delta they're going to be short Vega and now that we understand it they're going to be the long Vana if you catch a move in your favor if you catch a bullish move on a short po position that is very likely going to lead to very very quick profits and here's how you're long Delta the stock moves higher you're going to Make some money you're

short Vega and the stock moves higher that very likely also means that volatility is Contracting you're going to make some money but now we know that you are also long Vana that long Vana is going to cause your Deltas to shrink on that short putut position you know from 20 to 10 or from 30 to 20 but that Delta decrease it could help to contribute to sucking out the premium from the option in a similar way as to what we saw with Charm so that is a pretty big gimme when it comes to the return

turn side of Vana but not so fast because our old pal gotcha is right around the corner okay so what about Vana and risk reduction well to better understand or to best understand this angle of this Greek let's make sure that we all understand something we much prefer short puts as a standalone strategy over short calls as a standalone strategy the main reason why is quite simple the market wants to Go higher over time so consistently selling calls you know week after week you know cycle after cycle year after year is just not a great

strategy so as a result we are naturally going to be most of the time net long Vana in our portfolios does this have some risk associated with it yes it does and not so much because of Van's impact in isolation per se it's actually more of a compounding effect that Vana can have alongside the the other Greeks the other Higher order Greeks so to illustrate this let's suppose that my go-to strategy was selling five Delta puts and holding them to expiration let's work through the charm impact the vama impact the color impact and now the

Vana impact of that position first off your charm at five Deltas we already know it's going to be super strong right it's going to be great stock goes higher stock even goes nowhere that's going to be terrific that's going to be a great outcome for You we don't have to worry about that okay problem is your vama at five Deltas it's going to be peaked right it's also going to be looking pretty robust it's also going to be pretty strong so you're already short Vega if volatility starts to expand that's going to hurt but because

of the super strong super potent vama that short Vega it's going to grow and it's going to grow and it's going to grow and so further expansions in implied volatility they're going to hurt More they're going to hurt more and they're going to hurt more from from that peaked out vama now caller you're holding this guy to expiration what does that mean you're going to have to absorb color's impact on gamma which we learned is going to naturally cause gamma to grow and Gamma to strengthen as you get closer to expiration what does that mean

more moves in the stock against you are going to cause your gamma to grow they're going to cause your Delta to Grow they're going to cause more losses they're going to cause more pain all right and lastly is if it's not bad enough now we have Vanna which was great when the stock moved higher it was great when implied volatility was Contracting our Deltas were shrinking and everything was fine but now all of a sudden implied volatility might be growing the stock is falling implied volatility is very likely expanding so now what's going to happen

our Deltas are going to follow Suit our Deltas are going to expand which again the move is going against us so this can mean more pain this can mean more losses so hopefully now you can see how Vana can kind of be this contributing factor to you know more pain and more hurt and bigger losses in the event that you are not correct okay so naturally you might be out there thinking Jim that does not sound good man like how do I stay away from that like what can I do to avoid that Situation well

it's actually pretty easily avoidable all you have to do is two things number one stay away from those low Delta options we've already talked about this in other episodes we've already talked about this in other contexts and here it is again those guys are not your friend number two strategically diversify like short puts are great strategies and short puts will be one of the strategies that you use quite a bit but they're not the only Strategy so strategically diversify into strangles into straddles into racial spreads even some defin risk strategies like vertical spreads like iron

Condors like calendar spreads doing these two things alone will help you significantly mitigate the negative effects of Vana to to the point where you don't even have to actively monitor your Vana and just like that man I can't believe it but we are done that was by far and a way the hardest episode of the Greeks crash Course that I had to record I did a couple of those clips about 39 times that you guys thankfully will not have to see but you made it through episode number nine of the Greeks crash course Vanna is

in the books and when you are ready I will see you in the final episode of the Greeks crash course where we were going to bring this whole thing home and tied it off with a bow and talk about speed and this is it we made it the Grand finale here in episode number 10 we are going to cover speed and thankfully this is going to be a little downhill from what we experienced back in episode number nine where we covered Vana that was by far and away the most difficult most challenging episode for me

to put together in in the entire Greeks crash course and to be honest with yall there is only about a 60 Delta that I even explained it correctly so thankfully we have a little bit of a Cooldown set here with episode number 10 in the Greeks crash course with speed so what we're going to do we're going to cover this thing the same way that we've been covering all of the Greeks to this point we're going to talk about what it is we're going to talk about how we use it we're going to talk about

returns we're going to talk about risks so without further Ado let's dive ah head first into episode number 10 of the Greeks crash course speed So what is speed Well for now the 10th consecutive time inside of the Greeks crash course let's explain this two different ways let's do it mathematically and then let's do it intuitively so mathematically speed is another higher order Greek and it actually shares the same relationship with color in that it is another third derivative of the black Souls option pricing model it measures how gamma changes when the underlying stock price

Changes so at this point you are three layers deep price price and then price price once that's Delta price twice that's gamma price Thrice that is speed okay so there is the mathematical Foundation what about the intuitive side of speed well speed is going to give us yet another way to quantify our gamma risk exposure remember color taught us that gamma strengthens Gam grows as we get closer to expiration well with speed what we're going to see is this at the Money options that have the greatest gamma they also have the greatest highest speeds in

the money and out of the money options with lower gamas they also have lower less impactful speeds so on order entry by focusing on outof the- money options as premium sellers that prefer out ofth money options we are able to you know mitigate some of the deletar effects of speed right out of the gates so how do we use speed well guys different characters same story Right different plotline exact same ending we don't actively monitor our speed we saw this with charm we saw this with vama we saw with color we saw with Vana we're

now going to see it here with speed the reason why we don't the reason why we're not sitting at our desk you know just cranking out third derivatives is because we don't have to the mechanics that we already have in place cover our speed risk the protocols that we already follow they allow us to mute The negative effects of this Greek and so we don't have to actively monitor our speed however it is worthwhile to press forward even if only for a couple of minutes to at a bare minimum understand and appreciate the mathematical support

that is driving all of the different things that we do okay so what about returns and speed well as we've already seen right with these higher order Greeks it's usually an either order situation right they usually either help Us on the return side or they help us on the risk side like we saw charm and even Vanna those were more return metrics and then we saw color we saw vama those were more risk metrics so which side of the fence is speed going to land on well for us it really makes a lot more sense

to put this in the risk category and here is the reason why if we were interested in Long premium strategies and long gamma strategies if that was our strategy of choice then yes it would Make sense for us to pay closer attention to speed as a return driving metric and try to use speed to maximize our returns but we don't do that we don't buy premium we don't buy Gamma for a number of reasons right but the least of which is the negative Theta that comes along with those positions hey quick little shout out to

I believe it was what episode three in the original crash course where we talked about positive Theta we talked about negative Theta so definitely give that guy a look if you haven't checked it out already but we much prefer short premium and short gamma strategies so what that means is this gamma as we use it that's a risk mitigation metric so speed it's also going to follow sup and become a risk mitigation metric which is a great segue into our final section today all right so what about speed and risk reduction well the good news

is this the things that you're already Doing they're putting you in a position where your gamas are not really going to be that significant you're focusing on out of the money options you're diligently managing your positions at 21 days to go these things together are already going to mute the effect of your gamas at least at order entry inevitably though there are going to be times when stocks move against you there are going to be times when you have Los positions right spoiler alad your out of- the- Money options are going to move in the

money from time to time when this happens your gamas are going to grow when this happens your speed is going to increase so what do you do you adjust when your strike is tested we talk about this all the time I talked about this all the time in my strategy management crash course what do you do when your strike is tested well you roll the untested side of a strangle maybe you add a short call to a standalone short Put or May maybe you simply add duration to the trade all of these things are going

to come together to serve one unifying purpose they're going to water down your exposure to the Greeks including speed so what this does is the following everything slows down everything slows down so you can decide what to do next if you do that if you do these things then you will naturally take care of your speed risks and you didn't have to take a single derivative And just like that guys we are done the entire Greeks crash course has now come to a close I just want to say from the bottom of my heart that

if you made it through all of these episodes hey if you even just skipped to episode 10 and this is the only one you've seen I don't care I'm really really really humbled that you've chosen to invest your time in our content in my content it just means the absolute world to me so if you wanted to share this whole playlist with a Trader Friend that would be amazing if you want to save it for yourself for a future reference that would also be amazing and when you guys are ready I will see you in

the next crash course which should be coming your way in about three or four months so we'll see you there