Trading Option Greeks: How Time, Volatility, and Other Pricing Factors Drive Profit

by Dan Passarelli, William J. Brodsky (Foreword)

Veteran options trader Dan Passarelli explains a new methodology for option trading and valuation. With an introduction to option basics as well as chapters on all types of spreads, put-call parity and synthetic options, trading volatility and studying volatility charts, and advanced option trading, Trading Option Greeks holds pertinent new information on how more accurate pricing can drive profit. Most options traders focus on strategies such as covered calls, vertical spreads, butterflies and condors, and so on. But traders often don't know how to use the "greeks"—the five factors that influence an option's price—to trade more effectively. The "greeks" (Delta, Gamma, Theta, Vega, Rho) are tools to measure minute changes in an option's price based on corresponding changes Using the greeks can lead to more accurate pricing information that will alert an option trader to mispriced derivatives that can be exploited for profit. In straightforward language and making use of charts and examples, Passarelli explains how to use the greeks to be a better options trader.

Genres: Finance, Business, Nonfiction

352 pages, Hardcover

First published July 1, 2008

Reviews

[Mark Easter · Rating 5 out of 5]

A top options trader details a practical approach for pricing and trading options in any market condition

The options market is always changing, and in order to keep up with it you need the greeks—delta, gamma, theta, vega, and rho—which are the best techniques for valuing options and executing trades regardless of market conditions. In the Second Edition of Trading Options Greeks, veteran options trader Dan Pasarelli puts these tools in perspective by offering fresh insights on option trading and valuation.

An essential guide for both professional and aspiring traders, this book explains the greeks in a straightforward and accessible style. It skillfully shows how they can be used to facilitate trading strategies that seek to profit from volatility, time decay, or changes in interest rates. Along the way, it makes use of new charts and examples, and discusses how the proper application of the greeks can lead to more accurate pricing and trading as well as alert you to a range of other opportunities.

Completely updated with new material Information on spreads, put-call parity and synthetic options, trading volatility, and advanced option trading is also included Explores how to exploit the dynamics of option pricing to improve your trading

Having a comprehensive understanding of the greeks is essential to long-term options trading success. Trading Options Greeks, Second Edition shows you how to use the greeks to find better trades, effectively manage them, and ultimately, become more profitable.

**

From the Inside Flap

The financial markets are dynamic, and in order to keep up with them, you need the greeks—delta, gamma, theta, vega, and rho—the best techniques for valuing options and executing trades regardless of market conditions.

With extensive experience as a market maker, retail trader, and instructor in this field, nobody understands options better than author Dan Passarelli. And now, with the Second Edition of Trading Option Greeks, he provides you with the tools you'll need to succeed in the high-speed, highly technical arena that the options market has become.

Written to reflect current market conditions, this reliable guide will put you in a better position to effectively navigate today's options market, which includes a host of new products, strategies, and rules. Along the way, it skillfully discusses option Greeks from both a theoretical and practical perspective, and explains how and when to use them.

Divided into four comprehensive parts, this updated edition outlines a practical approach to the greeks—which measure changes in an option's value—and reinforces a trader's understanding of option pricing, volatility, market terminology, and strategy in a way that few other books can. Topics covered include:

Option-specific risk and opportunity, put-call parity and synthetics, and dividends and option pricing

Vertical spreads, wing spreads, and calendar and diagonal spreads

Delta-neutral trading—including the trading of implied and realized volatility

Advanced option trading issues from straddles and strangles to ratio and complex spreads

And much more

****Whether you're a professional trader or active individual trader, comprehensive knowledge of the greeks can help you avoid common pitfalls, limit risk, and increase profit potential. Putting the insights found here into practice will put you in a better position to excel at this challenging endeavor.

From the Back Cover

Trading Option Greeks

Second Edition

In option trading, there are an infinite number of uses for the "greeks" (delta, gamma, theta, vega, and rho), which measure changes in an option's value. From finding trades to managing and adjusting them, the greeks are truly a trader's best resource—but only if you know how to properly apply them.

Nobody understands option greeks better than author Dan Passarelli. And now, with the Second Edition of Trading Option Greeks, this seasoned options expert provides you with the tools you'll need to effectively implement them in your everyday trading endeavors.

Written from Passarelli's unique perspective, traders of all levels can benefit from this reliable guide. Page by page, it skillfully covers some of the most essential elements of this discipline, including various types of spreads, put-call parity and synthetic options, trading volatility, and advanced option trading issues. Along the way, it makes use of new charts and examples, and discusses how the proper application of the greeks can lead to more accurate pricing and trading as well as alert you to a range of other opportunities.

Having a comprehensive understanding of the greeks is essential to long-term trading success. This updated edition of Trading Option Greeks illustrates how you can apply the concepts contained here to real-world trading scenarios and get the most out of your time in today's dynamic market.

[André · Rating 5 out of 5]

“Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits” by Dan Passarelli is an absolute must-read for anyone serious about mastering options trading. This book stands out as a clear, insightful, and convenient guide that goes beyond the basics to equip traders with the tools they need to understand the forces driving option prices. Passarelli’s expertise shines through every chapter, making complex concepts like delta, gamma, theta, vega, and rho accessible and actionable.
What makes this book truly exceptional is its ability to bridge the gap between theory and real-world application. Passarelli doesn't just explain the Greeks — he shows how traders can use them to assess risk, fine-tune strategies, and make informed, profitable decisions. His writing is both engaging and informative, peppered with real trading examples and clear illustrations that bring the material to life.
Whether you're a novice looking to build a solid foundation or an experienced trader aiming to refine your edge, this book delivers powerful insights that can immediately improve your trading performance. Passarelli’s emphasis on risk management and strategy development ensures that readers walk away not just with knowledge but with a framework for long-term success.
In short, “Trading Options Greeks” is a modern classic in the world of options trading literature — comprehensive and practical. It belongs on every serious trader’s bookshelf.

[Parker · Rating 5 out of 5]

This was an excellent book about what option greeks are and how they are used professionally. It definitely helps to come into the book with some understanding of options and basic trading strategy, but he does a great job of weaning you from basic to advanced tools for Greeks. Overall will keep as a reference for a long time.

[Brent · Rating 5 out of 5]

Simply great.

[Abir Kar]

Probably the best primer on option greeks I have read. The author walks you step by step through the arcane world of options and how to use them in a variety of circumstances. Normally a book would stop here but not this book - Mr. Passarelli breaks down all the strategies into its constituent greeks and shows you how each of them act given various conditions and he does so in plain English. This book is not so much a how-to guide as a how-come tutorial as the author himself states in the preface and that is what makes the reading experience so much richer. This is more a handbook for trading than a textbook but doesn't skimp on in-depth discussions which is something that makes it stand out among the hundreds of books on option trading which are either too academic or too simplistic - this one falls in the Goldilocks zone.

[Arman · Rating 4 out of 5]

A must read for options traders.

[David Wilusz · Rating 4 out of 5]

Good book on trading the Greeks, but not for beginners!