[forex-or-stocks] Option Greeks

Option Greeks can be a very good way to estimate the price of an
option as a stock does one thing or the other. There are three reasons
why the Greeks can really help you out in the trading world.
1. Determine Stops
The most important thing to know in trading, especially when trading
options is where are your stops. Where is the point where you say, I
have had enough, right now I am just going to exit a position for a
small loss, before it gets any bigger,
The Greeks help you figure out roughly how much you are risking and
how much you will lose if everything turns against you. This makes it
easier to position size and limit your losses.
2. Determine Target
This also helps you estimate how much you can potentially make if you
are right. Knowing that ahead of time can help you determine if the
trade is even worth doing at all. Without a good sized return it may
be better to look for another investment instead.
3. Helps You Understand Options
By being able to estimate how an option moves when the price of a
stock moves you can understand them better. Because of this you are
able to determine which options are high risk and which ones are low
risk.
For instance an Out of the money option is higher risk because the
stock could move in the exact direction you want and you could still
lose money. On the other hand an in the money option can have a lower
risk because it moves much closer to a 1 to 1 bases with the stock.

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