The Greeks are all "Greek" to me

[kowski06]

I was wondering if you could break down in a more step by step way how you use the Greeks to determine your trade. I get the over all concept, and have read what the basic definitions for each Greek is, but I am feeling completely lost when it comes to trying to apply that to a specific trade.

I am using a virtual trading account right now while I learn, and I placed virtual trades for your current earnings plays for JOY and for CIEN. I placed my order based on your prices, but I am having a hard time wrapping my head around how you decided exactly when to buy, and how you figure out your breakeven point based on the IV and how all the various Greeks play into it.

Would it be possible to give a step by step for one of these indicating your thought process and the "Why" behind it all?

thanks

[ammarmalhas]

looks like it is a "public" demand dear Kim. How about writing a step-by-step guide with examples of each type of trade u use here Straddle, Strangle, Iron Condor, RIC ...etc with explanation of the "logic" used each step. I am sure u have explained this several times already and I know u wrote some nice "quick" articles about the subject, but we still lack a comprehensive detailed all-in-one-place explanation or mini course. Thank u in advance.

Kowski, we are in the same boat :-)

[Kim]

Will do.

[Stephen]

In my humble opinion you need to read, read, read! One of the books Kim has mentioned is "option volatility and pricing" by Natenburg is an excellent reference source to keep by your side.

[Kim]

http://steadyoptions.com/forum/topic/179-the-process-of-placing-the-earnings-plays/

[kowski06]

Thank you so much for the process of placing trades you posted. Point # 7 explaining the vega/theta ratio etc is especially helpful. That is where I was getting myself so confused. I will use this information to go back and work my way back through the trades again. I know I can't learn all this over night, but I was feeling overwhelmmed, and your clarification has definitely helped!

I have one follow up question concerning checking the historical IV increase. Is there an approx % spike/increase you typically look for when you go into optionistics?

Thanks again!

[Kim]

I just want to see consistent spikes. The absolute number will not tell you much since the numbers are very different for different stocks. The same holds for vega/theta ratio: it really depends on time to expiration and the specific stock. The closer to expiration, the bigger the ratio will usually be since with close expiration, the IV increase is much larger.