How to read the greeks

[Amos]

In the example below we have current stock price of Amazon at 752.61 and Bidu at 165.63

My question is for each greek how does this look like in dollars and when I see a theta loss in percentage people use?

Example:

Amazon stock price 752.61

Delta 2.40

Gamma .08

Theta -71.34

Vega 2.72

 

Would Delta read $2.40 and would the percentage be calculated 2.40/752.61=.003 or .3% ?

Another example is Theta loss. Theta is -71.34. Would it read in dollars -71.34 and theta loss percentage be calculated -71.34/752.61=.09 or 9% ?

[Amos]

Another example in picture below. Where are you getting the 2.5% from? This is from article about BIDU

http://seekingalpha.com/article/346961-5-ways-to-play-baidu-earnings

[Kim]

You are reading it correctly for the greeks. Percentage is meaningful only for theta not other greeks. 2.5% is total theta divided by the stock price, as in the first example.

 

Our  Education Center has section dedicated to the Greeks, with some videos. I recommend reading the articles, and you could also ask question in the comments section of the relevant article.

[Amos]

2 hours ago, SteadyOptions said:

You are reading it correctly for the greeks. Percentage is meaningful only for theta not other greeks. 2.5% is total theta divided by the stock price, as in the first example.

 

Our  Education Center has section dedicated to the Greeks, with some videos. I recommend reading the articles, and you could also ask question in the comments section of the relevant article.

I kind of got confused yesterday with this and was trying to understand the issue at hand. When you say percentage is only meaningful for theta it makes a lot of sense. I will read again the section of the greeks this weekend to see if I am missing something.

[Kim]

Think of it this way: theta tells you how much your trade gains or loses every day (all other factors equal). If it is say $10, it is important to see if the $10 applies to $100 trade (in which case you lose/gain 10% per day) or $1000 trades (in which case it is only 1%).

 

But if your delta $5, then percentage doesn't really tell you much. Same for gamma and vega.

[Amos]

1 minute ago, SteadyOptions said:

Think of it this way: theta tells you how much your trade gains or loses every day (all other factors equal). If it is say $10, it is important to see if the $10 applies to $100 trade (in which case you lose/gain 10% per day) or $1000 trades (in which case it is only 1%).

 

But if your delta $5, then percentage doesn't really tell you much. Same for gamma and vega.

Well what gets me I think is the TOS platofrm. The example above is best way to explain.

On TOS platform the Gamma shows .08. Now do you read it as .08 dollars or 8 dollars.

And I am sure it is $8. So when I moved the decimal places over I saw theta at -71.34. So is it -71.34 dollars or -7134 dollars. See thats what gets me. Why move the decimal for some and not all.