Delta: how much the option moves per $1 of price (also ≈ probability of expiring ITM). Theta: daily time decay (a cost to buyers, income to sellers). Vega: sensitivity to volatility. Gamma: how fast delta changes. Together they decompose an option's risk.
💡 Reading delta
A 0.50-delta call moves ~$0.50 for a $1 move in the stock, and has roughly a 50% chance of expiring in-the-money. A 0.10-delta call is a cheap lottery ticket; a 0.90-delta call trades almost like stock. Delta is your exposure dial.
Theta decay
Time is the option buyer's enemy and the seller's friend. A long option loses value every day even if price doesn't move (theta). A short option earns that decay. This is why many sellers prefer selling options with 30-45 days to expiry, where decay accelerates.
Core strategies
Covered call (own stock, sell a call): income, caps upside. Protective put (own stock, buy a put): insurance. Vertical spread (buy one, sell another): defined risk and reward. Straddle (buy call + put): profits on big moves either way.
💡 Matching view to strategy
Bullish and want income? Covered call or bull call spread. Bearish? Buy puts or a bear spread. Expecting a big move but unsure of direction? Straddle. Expecting calm? Iron condor. The strategy follows the view — never the reverse.
Defined vs undefined risk
Spreads and defined-risk strategies cap your loss. Selling naked options carries undefined risk. Beginners should stay in defined-risk trades until they fully understand the Greeks and margin. Never sell an option whose worst case you can't afford.