School of Stocks


Module Overview

In this module, we will talk in detail about a very versatile derivative instrument called options. We will start right from the basic terminologies, such as defining what an option is, type of options, option moneyness and price etc. Once the basics are clear, we shall then proceed to more complex matters, such as Option Greeks and Strategies. The objective of this module is to familiarise the reader with the intricacies of options, so that one can understand how to successfully use these versatile instruments.


1. Introduction to Options

8 Lessons

In this chapter, we will introduce the basis elements of an Option. We will cover things such as what is meant by an option, what are the two types of options, what is meant by strike price, option price, expiration date, etc. The objective of this chapter is to familiarize the reader with the basics of options.

2. Option Price and Option Moneyness

5 Lessons

In this chapter, we shall study some crucial concepts that pertain to options. These include the two elements of option price (intrinsic value and time value) and moneyness of an Option. We will also cover how to calculate the breakeven point of an option, how to calculate the profit/loss potential of an option and discuss about the option payoff charts. We will conclude this chapter by talking about the key terminologies that were covered over the course of this chapter.

3. Factors that impact Option Price

7 Lessons

Now that we have a good understanding about the basic elements of an Option, it is time to dig in a little deeper. In this chapter, we will talk about the seven factors that impact the price of an option. Gaining a good understand about these factors is the first step towards understanding how option prices move.

4. Introduction to Option Greeks

5 Lessons

Now that we have a strong understanding of the key elements of options, it is time to move on to a critical part of the Options module: Option Greeks. In this chapter, we will introduce each of the five Option Greeks. Post this chapter, we will devote an entire chapter to each of the five Greeks. Again, the objective of this brief chapter is to just introduce Option Greeks to the reader, and nothing more.

5. Delta

8 Lessons

In this chapter, we shall talk in detail about the first of the five Option Greeks: Delta. We shall start right with the basics of Delta and then proceed towards more complex areas such as how option moneyness impacts Delta, how time and volatility impact Delta etc. We will then conclude this chapter by talking about the derivative of Delta: Gamma.

6. Gamma

8 Lessons

In this chapter, we will study about a derivative of Delta, called Gamma. We will start the chapter by introducing Gamma, including how it impacts the Delta of an option. We will then talk about how Gamma is impacted by option moneyness, time to expiration, and volatility.

7. Vega - Part 1

4 Lessons

In this chapter, we shall introduce the concept of Volatility. We shall talk about how volatility is calculated and the two most commonly used types of volatility in options parlance: Historical Volatility and Implied Volatility. The chapter acts as a precursor to our main topic of discussion on Vega, which will be covered in the next chapter.

8. Vega - Part 2

5 Lessons

In the previous chapter, we introduced the concept of Volatility. We saw things such as what volatility is, the most widely used measure of volatility, how to calculate and interpret standard deviation, how to annualize standard deviation, how to convert annualized standard deviation into the time period that you desire, how to calculate standard deviation in Microsoft Excel, what historical volatility is, and what implied volatility is. Given that we now understand the basics of volatility, it is time to refocus on Options Greeks and talk about our next Greek: Vega.

9. Theta

6 Lessons

In this chapter, we will talk about another crucial Option Greek called Theta. We will start our discussion by introducing Theta and then talking about its other important details. We shall see why Theta is a friend to an option writer and an enemy to an option holder. Kindly go through this chapter diligently as Theta has a strong impact on the price of an option and is without a question, one of the most crucial option Greeks to keep an eye on.

10. Rho

6 Lessons

In this chapter, we will talk about the last of the five Greeks: Rho. Rho is the least important option Greek, simply because it has the lowest impact on options, especially the ones that are short-term in nature. That said, we will still talk about this Greek given that it can influence the trajectory of longer-term options.

11. Summarizing Greeks

6 Lessons

In this chapter, we will recap what we studied over the past few chapters on Option Greeks. We will conclude this chapter by talking about some vital relations to keep in mind about Option Greeks

12. Reading Option Chain using Volume & OI

11 Lessons

In this chapter, we shall study about how to read an option chain using two vital tools: Volume and Open Interest. We will use the option chain available on the website of the National Stock Exchange as our reference.

13. Miscellaneous

9 Lessons

In this Chapter, we will study about some of the important concepts that we have not studied so far in the Options Module. It is equally important to understand each of these concepts, as they are extremely useful, especially when trading options.