.....following on from the other thread http://www.aussiestockforums.com/for...?t=1366&page=1
and Dutchies question.....
Option greeks are all very acedemic an' all, but few option traders actually use them to trade options!
Why is that? Well one reason is that they are so bloody difficult to understand, and in my opinion, are poorly explained by options authors. This is not the authors fault as they are usually have very mathematical brains and the way they view, and expain the greeks flies over the heads of us mere mortals.
Hopefully, i won't have increased confusion with my explanations LOL
Another reason is than they are sometimes *completey ignored by the seminar industry...are at best, quickly brushed over.
So we mortals start our option trading from behind the eight ball and get worked over by the smarties. ( If you haven't yet, you will. Record low IV's have made it easy to be an option buyer...wait til IV's start bouncing around a bit ) Let me be the first to admit that I started off knowing SFA as well. It was from being defeated by MM's that made me go and learn some more.
So here are the greeks (plus extra considerations) that I use to trade.
implied volatility skew (thanks for the heads up Possie )
There is one other, Rho, that won't affect us in the current interest rate environment.
I'll work through how to use these in trading as I have time/motivation.