Defintions

Options Greeks Cheat Sheet 
 All examples below use BHP: current price $83.33, put strike $80, option price $1.15, 15 days to expiry. 
 Implied Volatility (IV) 
 What it is: The market's expectation of how much the stock price will move over the next year, expressed as a percentage. 
 
 
 
 Value 
 What it means 
 
 
 
 
 0–20% 
 Low volatility — stock expected to be calm 
 
 
 20–50% 
 Normal range for most stocks 
 
 
 50–80% 
 High volatility — big moves expected 
 
 
 80%+ 
 Extreme volatility — options are expensive 
 
 
 
 
 Your BHP put: IV ≈ 24% → Fairly normal volatility for a large ASX stock like BHP. 
 
 
 Delta (Δ) 
 What it is: How much the option's price moves when the stock moves $1 . 
 
 
 
 Value 
 What it means 
 
 
 
 
 0.00 to +1.00 
 Calls — rises when stock rises 
 
 
 0.00 to −1.00 
 Puts — falls when stock rises 
 
 
 ±0.50 
 Roughly 50/50 chance of expiring in the money 
 
 
 ±0.80–1.00 
 Deep in the money — moves almost like the stock 
 
 
 ±0.01–0.10 
 Far out of the money — very unlikely to profit 
 
 
 
 
 Your BHP put: Delta ≈ −0.20 → For every $1 BHP rises, this put loses ~$0.20. For every $1 BHP falls, it gains ~$0.20. Also read as roughly a 20% chance of expiring in the money. 
 
 
 Gamma (Γ) 
 What it is: How much delta itself changes when the stock moves $1. Think of it as delta's sensitivity. 
 
 
 
 Value 
 What it means 
 
 
 
 
 High (0.05+) 
 Delta changes rapidly — option is very sensitive to price moves 
 
 
 Low (0.001–0.005) 
 Delta barely changes with price moves 
 
 
 Near expiration 
 Gamma spikes dramatically 
 
 
 
 
 Your BHP put: Gamma ≈ 0.07 → If BHP drops $1, delta moves from about −0.20 to roughly −0.27. Meaningful, because this put is only 15 days out and close to the strike. 
 
 
 Theta (Θ) 
 What it is: How much value the option loses each day just from time passing, assuming the stock price stays flat. Always negative for buyers. 
 
 
 
 Value 
 What it means 
 
 
 
 
 −0.01 to −0.05 
 Slow decay — often far from expiration 
 
 
 −0.05 to −0.20 
 Moderate decay 
 
 
 −0.20+ 
 Fast decay — usually near expiration or high IV 
 
 
 
 
 Your BHP put: Theta ≈ −0.04 → Loses about four cents per day (×100 shares per contract) just from time passing. As a seller, this works for you — every day BHP stays above $80, the option you sold decays toward zero. 
 
 
 Vega (ν) 
 What it is: How much the option's price changes when IV moves 1% . 
 
 
 
 Value 
 What it means 
 
 
 
 
 High (0.50+) 
 Very sensitive to volatility changes 
 
 
 Low (0.01–0.10) 
 Less affected by volatility shifts 
 
 
 Long options 
 You benefit when IV rises 
 
 
 Short options 
 You benefit when IV falls 
 
 
 
 
 Example: If your BHP put has a Vega of 0.05 and IV jumps from 24% to 28%, the option gains roughly $0.20 in value (×100 = $20 per contract) — bad news if you're short the put. 
 
 
 Rho (ρ) 
 What it is: How much the option's price changes when interest rates move 1% . Usually the least important Greek for short-term traders. 
 
 
 
 Value 
 What it means 
 
 
 
 
 Positive (calls) 
 Rising rates slightly increase call value 
 
 
 Negative (puts) 
 Rising rates slightly decrease put value 
 
 
 Near zero 
 Short-dated options barely affected 
 
 
 
 
 With only 15 days to expiry, Rho has almost no practical effect on your BHP put. 
 
 
 Delta as a Probability Estimate 
 Delta is commonly used as a rough estimate of the probability an option expires in the money . It's not mathematically exact (the true theoretical probability is a related figure called N(d2)), but it's close enough that most traders use it this way in practice. 
 
 
 
 Delta 
 Rough probability of expiring ITM 
 
 
 
 
 ±0.10 
 ~10% chance 
 
 
 ±0.25 
 ~25% chance 
 
 
 ±0.50 
 ~50% chance (coin flip) 
 
 
 ±0.80 
 ~80% chance 
 
 
 
 
 Traders often pick strikes by targeting a delta — e.g. selling puts around 0.20–0.30 delta (like your BHP $80 put) to aim for roughly a 70–80% chance of keeping the full premium. 
 
 
 Buying vs. Selling Options — Risk Profile 
 
 
 
 
 Buying (long) 
 Selling (short/writing) 
 
 
 
 
 Max loss 
 Limited to premium paid 
 Can be very large (naked calls: unlimited; naked/cash-secured puts: strike price × 100) 
 
 
 Max gain 
 Can be large/unlimited (calls) 
 Limited to premium collected 
 
 
 Time decay (theta) 
 Works against you 
 Works for you 
 
 
 Why WSB accounts blow up 
 Rarely from buying alone 
 Usually from selling naked options with leverage, then getting caught by a big move 
 
 
 
 
 Income Strategies 
 Cash secured put: Sell a put and set aside cash equal to strike × 100. Keep the premium regardless. If assigned, you buy 100 shares at the strike price — often used on stocks you're happy to own anyway, effectively lowering your cost basis by the premium received. 
 Covered call (stock secured call): Own 100 shares, sell a call against them. Keep the premium regardless. If assigned, you sell your shares at the strike — a way to generate income from stock you already hold. 
 The wheel strategy: Sell cash secured puts to acquire shares you want; once assigned, sell covered calls against those shares to generate ongoing income; if called away, go back to selling puts. A cyclical income strategy combining both. 
 
 Important nuance: If you get assigned on a cash secured put and plan to hold long-term, this isn't a realized loss — you've simply bought shares at (strike − premium), even if the market price is temporarily lower. It only becomes a real cash loss if you close the option itself at a worse price than you sold it for (e.g. via a stop loss). 
 
 
 Stop Loss & Take Profit on Options 
 These trigger a buy-back (if you're short) or a sell (if you're long) at a set option price, not the stock price. 
 If you sold (short) an option: 
 
 Option price rising = bad for you (stock moving against your position) 
 Set stop loss above your entry price (e.g. sold at $1.15 → stop loss at $2.15) to cap losses 
 Set take profit below your entry price (e.g. take profit at $0.50) to lock in gains 
 P&L formula: (entry price − exit price) × 100 per contract 
 
 If you bought (long) an option: 
 
 Option price falling = bad for you 
 Set stop loss below entry price 
 Set take profit above entry price 
 
 
 Example: Sell BHP put at $1.15, stop loss at $2.15. If triggered, you buy back at $2.15 having only received $1.15 — that's a real cash loss of $100 per contract , not a discount. This is different from being assigned shares at expiration, which is a stock purchase, not a cash loss (assuming you're happy to hold the shares). 
 
 
 Open Interest 
 The total number of contracts of a specific strike/expiry currently open (not yet closed, exercised, or expired) — different from volume , which is how many traded today . 
 
 New contract created (both sides opening) → open interest +1 
 Existing position closed (either side) → open interest −1 
 One trader takes over another's existing position → open interest unchanged , volume still rises 
 
 Why it matters: Higher open interest generally means tighter spreads and easier entry/exit. Low open interest — common on many ASX options strikes, especially further OTM ones — often means wide spreads and harder fills. It's also watched as a sentiment/positioning indicator, especially around major expiries. 
 
 Trading Options on the ASX 
 
 ASX-listed options trade through ASX Trade , cleared via ASX Clear — you never deal directly with your counterparty 
 Requires a broker and a signed Client Agreement before trading options 
 ASX options generally have much lower liquidity than US options — wider spreads, fewer strikes/expiries available 
 Common brokers: Interactive Brokers (lowest fees, broadest access to both ASX and international options), CMC Markets , IG Australia 
 
 
 Quick Reference: Your BHP Put ($80 Strike, 15 Days to Expiry) 
 
 
 
 Greek 
 Approx. Value 
 Plain English 
 
 
 
 
 IV 
 ~24% 
 Normal volatility for BHP 
 
 
 Delta 
 ~−0.20 
 Gains ~$20 per contract for every $1 BHP falls; roughly 20% chance of finishing ITM 
 
 
 Gamma 
 ~0.07 
 Delta shifts noticeably as BHP moves — this put is close to the strike 
 
 
 Theta 
 ~−0.04 
 Loses ~$4/day per contract from time alone (works in your favour as the seller) 
 
 
 Contract credit 
 $115 
 $1.15 quote × 100 shares 
 
 
 
 
 Key Concepts to Remember 
 
 One contract = 100 shares. Always multiply the quoted price by 100 to get your actual cost (or credit received). 
 Out of the money (OTM): The stock price hasn't reached your strike yet. For puts, this means the stock is above your strike price. 
 In the money (ITM): Your option has intrinsic value. For puts, this means the stock is below your strike. 
 Time decay accelerates as expiration approaches — the last 30 days are the fastest decay period. 
 IV crush: After major news events (earnings, etc.), IV often drops sharply, taking option prices with it even if the stock moves in your favour. 
 Assignment ≠ automatic loss. Being assigned shares on a cash secured put just means buying stock at (strike − premium). It's only a realized cash loss if you close the option position itself at a worse price than you opened it. 
 
 
 Worked Example: BHP Cash Secured Put 
 Stock price: $83.33 | Strike: $80 | Expiry: 15 days | Option price: $1.15 (sell to open) 
 
 
 
 Scenario 
 What happens 
 
 
 
 
 Option price decreases 
 Good for you — stock staying above $80, option losing value toward zero 
 
 
 Option price increases 
 Bad for you — stock falling toward/below $80, higher chance of assignment 
 
 
 Stop loss at $2.15 hit 
 You buy back at $2.15 vs. sold at $1.15 → real loss of $100/contract 
 
 
 Held to expiry, assigned at $80 
 You buy 100 shares at $80, keep the $1.15 premium → effective cost basis ≈ $78.85/share 
 
 
 Assigned but happy to hold long-term 
 Not a realized loss — you own shares you wanted, at a discount from the premium