Divergence Secrets

Greeks and Risk Management

Every option trader must understand Greeks, the risk measures that show sensitivity of option price to different factors:

Delta → Measures how much the option price changes if underlying moves 1 unit.

Gamma → Measures how delta itself changes with price movement.

Theta → Time decay; how much premium falls as expiry nears.

Vega → Sensitivity to volatility. Higher volatility increases premium.

Rho → Sensitivity to interest rates.

Greeks allow traders to hedge portfolios and adjust positions dynamically.

Strategies in Option Trading

Options shine because you can combine calls, puts, and different strikes to create unique strategies.

Directional Strategies

Buying Call → Bullish play.

Buying Put → Bearish play.

Covered Call → Own stock + sell call → generates income.

Protective Put → Own stock + buy put → insurance.

Neutral Market Strategies

Straddle → Buy call + put at same strike → profit from big moves either way.

Strangle → Buy OTM call + OTM put → cheaper version of straddle.

Iron Condor → Sell OTM call and put spreads → profit if market stays in range.

Advanced Plays

Butterfly spread, calendar spread, ratio spreads – for experienced traders.

Options vs. Futures and Stocks

Stocks → Simple ownership. Risk = unlimited downside, reward = unlimited upside.

Futures → Obligation to buy/sell at future price. High leverage, unlimited risk.

Options → Rights, not obligations. Limited risk (for buyer), flexible payoffs.