FX Options Trading: Basics and Strategies | Episode 4: Indicators for Measuring Premium Variability [Naonishi Tahei]

Oyone-shi Yohei's Profile

Financial journalist. After working at a publishing company, he became independent in 1995 and has contributed articles mainly on finance and economics to money magazines, business magazines, and weekly magazines. He has covered many interviews with analysts and strategists active at the front lines of the market, as well as top executives of public companies. He is proficient in FX and all financial trading in general.

Six indicators to gauge trading or price fluctuation

Options are contracts that give the holder the right to buy (call) or sell (put) at a predetermined exercise price on a predetermined date (or within a date range). We have explained in this series that the trading price is called the “premium,” and that it fluctuates daily.

This time, I would like to touch on indicators that measure the changes in the premium. These are called the “Greeks,” and there are six types: 1) Delta 2) Gamma 3) Vega 4) Theta 5) Rho 6) Rho—[Note: The original Japanese text lists ① Delta ② Gamma ③ Vega ④ Theta ⑤ Rho ⑥ Alpha; the English typically uses Rho and sometimes Lambda or Vega etc. Here I’ve translated as commonly used terms for clarity.] More specifically, few traders check up to ⑤ and ⑥ meticulously. Therefore, here I will proceed with explanations only for ①–④.