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Epsilon Options

Options Trading Education

  • Home
  • How Options Work
    • In The Money (ITM) Options
    • Puts and Calls Explained
    • Learn Options Trading
    • LEAP Options Explained
    • Put Call Parity
    • Buy to Open vs Buy to Close
    • Out Of The Money (OTM) Options
    • Strike (Exercise) Price
    • Implied Volatility
    • Volatility Skewness | IV Skew In Options
  • Options Greeks
    • Delta
    • Vega
    • Gamma
    • Theta
    • Rho
  • Options Spreads
    • Long Call
    • Long Put
    • Bear Put Spread
    • Iron Condor
    • Bull Call Spread
    • Covered Calls
    • Synthetic Covered Call
    • Buying Straddles Into Earnings
    • Covered Call LEAPs
    • Calendar Spread
    • Backspread
    • Strangle
    • Butterfly
    • Protective Put
    • Long Box Spread
    • Straddle
    • Vertical Spread
    • Zero Cost Collar
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Options Trading Education

Options trading is a potential lucrative sideline for those willing to put in the effort.

Epsilon Options is here to help you learn the skills you’ll need to become a better trader, whatever your current level of knowledge or experience. We show you the best way to learn options trading.

This options trading education is in five main sections:


Table of Contents

  • How Options Work
  • Option Greeks
  • Basic Option Spreads
  • Advanced Option Spreads
  • Options Brokers

How Options Work

Understanding how options work is key for anyone wanting to trade options seriously. We look at the key things you need to know including the background and history of options trading, the so-called options greeks, how to calculate an options trade’s profitability and some key options terms.

In particular we look at:

  • What Are Options?: Where did they come from? How do they work? What are the common types?
  • Using an Options Broker: How do you buy or sell options? How do you read an options chain?
  • Options Pricing Models: How do you work out how much to pay for an option?
  • Uses of an Option: What are options used for now? Focus on insurance, leverage and speculation.
  • Common Options Trading Terms: Glossary of key terms you need to know to be an options trader.

Option Greeks

learn options greeks

Option Greeks are such an important part of understanding how to trade options that they have a section all on their own.

‘The Greeks’ are a collection of metrics used to measure how an options price changes given a change in factor. For example delta measures how much an options price moves should there be a change in the stock price.

For each greek below we look at exactly what its measure and, more importantly, how it can be used by a trade:

  • Delta: How is options pricing affected by stock price?
  • Gamma: How is delta itself affected by stock price?
  • Vega: How does volatility affect an option’s price?
  • Theta: How does an option’s price change over time?
  • Rho: What’s the effect of interest rates on options pricing?

Basic Option Spreads

Option Spreads are the way most options traders trade. They’re a combination of bought and sold options which are put on in such a way that they can be used to profit whenever an underlying security behaves in a forecast way.

Here we look at some basic option spreads including covered calls and vertical spreads:

Bear Spreads: Vertical spread used when you think a stock will fall
Bull Spreads: Used when expecting a stock to rise
Horizontal Spreads: For example the calendar spread
Diagonal Options Spreads: A combination of a vertical & horizontal spread
Covered Calls: A common beginner trade involving a stock and a sold call


Advanced Option Spreads

Here we look at some advanced option spreads, used by sophisticated traders to profit whatever the market is doing.

We’ll look at:

Calendar spreads: Calendars are an example of a horizontal spread.
Butterflies: Butterflies used when expecting a stock not to move.
Iron condors: Iron Condors are another spread to trade when not expecting a stock to move.
Straddles: Straddles are used when expecting a strong stock move, but not sure in which direction.
Strangles: Strangles are similar to a straddle.


Options Brokers

Getting the right options broker is vital for any options trader. We consider what to look for – including cost, tools, education, customer service and user interface – so that you can match your knowledge and experience with the best broker for you.

And then we review some of the main options brokers: which is the best?

We look at the following popular brokers, used by amateur traders with different levels of skill and experience:

Interactive Brokers: Full service broker particularly good for international trading products
OptionsXpress: Specialised broker now owned by Charles Schwabb
OptionsHouse: Value broker offering a good no frills service

Each section is packed with valuable information to help you master the world of options trading.

If you have any questions then don’t hesitate to contact me via the contact page. In the meantime best of luck and enjoy the site.

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Further Reading On Options Trading...

Covered Calls Options Strategy Guide

Introduction To Covered Calls Covered calls have always been a popular options strategy. Indeed for many traders, their introduction to options trading is a covered call used to augment income ...
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The Long Box Spread Options Strategy | Risk Free ‘Arbitrage’

The long box spread options strategy involves buying a bull call spread simultaneously with a bear put spread, both of which have similar strike prices and expiration dates of the ...
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In The Money (ITM) Options Explained

In the money options are those whose strike price is less (for call options) or more (for put options) than the current underlying security price. Options provide the right to ...
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Position Delta | What Is It? How Is It Calculated?

Position delta is the profit or loss of the entire option position relative to a $1 change in the price of the underlying asset. It is usually expressed in dollar ...
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Stock Option Strike (Exercise) Price Explained

The option strike price (also known as the exercise price) is a term used in options trading. Options are derivatives. These financial instruments are ‘derived’ from another underlying security such ...
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Sell to Open vs Sell to Close

What is Sell to Open vs Sell to Close? We look at these two similar, but not exactly the same, concepts. There are two ways to participate in the options ...
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Protective Put: This Defensive Put Option Strategy Explained

How Can The Protective Put Strategy Help A Trader? Introduction To Protective Puts The protective put (sometimes called a married put) strategy is one of the simplest, but most, popular, ...
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Options Brokers Reviews

How To Choose The Best Options Broker There are several things an option trader needs to look for in an options broker. However, whilst most traders will need most, if ...
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Puts and Calls: Stock Options Explained

What Are Puts and Calls? We've seen before exactly what options are, how they work and their function. Here we go further and explore the two main flavour of options ...
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Options Trading Strategies: Call And Put Backspreads

Backspreads: Extreme Bullish Or Bearish Options Trading Strategies What Are Backspreads? A backspread is very bullish or very bearish strategy used to trade direction; ie a trader is betting that ...
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Extrinsic Value In Options Trading

What is Extrinsic Value In Options Trading? The extrinsic value of a stock option contract is the portion of the option's worth that has been assigned to factors other than ...
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LEAP Options Explained: What Are They And How Do They Work?

Investors that are looking to make longer-term bets may use LEAP Options. Description of LEAP Options A LEAP option is essentially an option with longer terms than standard options. The ...
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Options Trading Strategy: Long Put

What Is A Long Put? A long put option strategy is the purchase of a put option in the expectation of the underlying stock falling. It is delta negative and ...
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Options Delta Explained: Sensitivity To Price

Options Delta is the measure of an option’s price sensitivity to the underlying stock or security’s market price. It is the expected change in options price with a 1c change ...
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Buy to Open vs Buy to Close

What is Buy to Open vs Buy to Close? We look at these two similar, but not exactly the same, concepts. (We have similar post on the opposite trade: Sell ...
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Featured Posts:

Options Spreads: Put & Call Combination Strategies

Protective Put: This Defensive Put Option Strategy Explained

Options Greeks: Theta, Gamma, Delta, Vega And Rho

How To Learn Stock Options Trading: Stock Options For ‘Dummies’

LEAP Options Explained: What Are They And How Do They Work?

Options Trading Strategy: Butterfly Spread

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