Go to http://www.amazon.com/gp/product/B00JFB3V7O to learn more about About Option Trading. Let's go back to our option chain here, for a second, and call up a set of options. Remember that we have Delta, Gamma, Theta, and Vega. We talked about Delta. Delta affects how your option is priced, based on a dollar move in the underlying instrument. In this case, if we pick the January 12 $1.20 call options, Delta is .53. For every dollar that the DIAs go up, you will gain $53 in profit. For every dollar that it goes down, you will lose $53 in profit. The Deltas change based on the strike prices in which the underlying ETF is trading at. We have been talking a lot about Vega, and a lot about volatility. There is one more thing that I want to show you, that gives you a good idea of what happens to the price of an option when volatility increases. Let's go over to the Analyze tab, and add some simulated trades. We're just going to pick any option we want to here. Let's go ahead and take these DIAs. These are the January 2012 expiration date, strike $1.21 call options. Let's go over to our Risk Profile. This is a risk profile tab for the Think or Swim platform. It's a very nice platform because it allows you to look and quickly analyze the profit and loss of any option or stock position that you might have. Down here, there's a little button. It looks like a little wrench. You just click on that, and what I want you to pay attention to is the volatility adjustment here, that I'm going to be playing with. Right now, as this option is priced, the DIA ETF is priced at $120.27. That's the live price. We have a Vega of 15.85. For this particular option, they're pricing it with an implied volatility of %15.85. This is a fairly low volatility. What happens if the volatility goes up by just 5%? I'm going to adjust this by just 5%, and look what happens to our profitability of this option. It jumps up $74.85 in profit, just with an increase in volatility - without even the underlying ETF moving. An increase in volatility will give you a $74.85 profit, per option contract. Volatility plays a tremendous role in not only the price of an option, but also the profitability of an option, should the volatility increase. That's why volatility is incredibly powerful. I've seen volatility go up to as high as 85%. Imagine what would happen if we adjusted the volatility at 50%, which would give it a total volatility of 65%. You would have profits of $788.45 per option contract, if the volatility should rise dramatically. It can dramatically affect the price of an option. Let's recap here. You know what Delta is. For more About Option Trading videos be sure to check out our channel: http://www.youtube.com/channel/UCXr2lclULvZAUS7iaKfLQlg To learn more about the Genius Trading System course go to: http://www.amazon.com/gp/product/B00JFB3V7O Additional Tags ================ vertical spreads, options greeks, what is options trading, iron condor, option volatility, option spreads, options volatility, how to trade in options, option strategies, index options, equity options, virtual trading, options spreads, virtual options trading, options trading tutorial, option trading strategy, options trading course, how to trade stock options, options trading systems, options training, learning options, learn to trade options, option trading tutorial, options trading strategy, option trading course, option trading systems, options trading basics, option trading basics, option trading system, options trading courses, options trading training, trade options, what is a stock option, options strategies
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