Comment on Application of Option Greeks

Karthik Rangappa commented on 24 Aug 2014, 02:16 PM

Thanks Guru Rao, I’m glad you liked the post.

For selecting the strike, and when to take the positions I would suggest you go through the Theta section of the article. Along with this, I’d also suggest you look for the volatility of the stock. For example, if the monthly volatility of a stock trading at 100, is 15%, then it makes sense to write options beyond the regular volatile range of the stock. In this case, I’d be happy to write 120 Call option.

Calculation as below..

Stock price = 100
Vol = 15%
Margin of safety on volatility = 5%
Total room for Vol = 15%+5% = 20%
Strike to be selected = 100*(1+20%) = 120

Option writing does lead to sleepless night, one has to just adopt to it 🙂

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