The Greeks, implied volatility and the volatility smile, spreads, straddles, iron condors and calendar spreads: go from single legs to combinations, and pick a strategy to fit your view.
For: learners who have finished both options courses and want to express views and manage risk with options
Risk warning: forex, CFDs, options, futures and crypto assets usually involve leverage or high volatility, and you can lose more than you put in. This lesson only teaches the concepts; all numbers are for illustration and are not investment advice.
This course uses ideas from the courses below (optional; you can start right away).
For every $1 the stock moves, how much does the option move? That "speed" is Delta. The speed itself changes too, and how fast it changes is Gamma.
Option prices hide the market's expectation of future swings. Work backward from the price and you get implied volatility; how much the option price changes per 1 percentage point of it is Vega.
Before earnings everyone rushes to buy options and IV gets pushed up. Once the results are out, uncertainty vanishes and IV drops instantly, so you can lose money even if you called the direction right.
Buy one option and sell another of the same type at a further strike: it costs less, and both the gain and the loss are capped.
Not sure whether it'll go up or down, only that it'll move a lot? Buy a call and a put together. Same strike is a straddle; different strikes is a strangle.
Sell a strangle to collect premium, then buy protection further out on each side. Risk is capped, and you make money if the stock stays in the range.
Answer two questions first: do you think it'll rise, fall or stay put? Will volatility grow or shrink? The answers lead you to the matching strategy.
Sell a near-month option and buy a far-month option at the same strike. The near month's time value melts fast and the far month's slowly; if the stock sits near the strike, that speed difference is your profit.
For the same stock and expiration, different strikes have different implied volatilities. Downside puts on stocks are often pricier: the market charges extra for "crash" insurance.