Week 5: The Greeks – Your Dashboard

If you are flying a plane, you need a dashboard to tell you your speed and altitude. In options trading, “The Greeks” are your dashboard. There are many Greeks, but as a Sniper, you only care about two: Delta and Theta.

1. Delta ($\Delta$): The Probability Gauge

Wall Street uses Delta to measure how much an option’s price moves. But we use it as a Probability Calculator.

• Delta ranges from 0 to 1.0.
• The Rule of Thumb: Delta roughly equals the probability that the option will end up “In The Money” (ITM).
• Our Target: We look for 30 Delta (0.30) or lower.
  • This means there is only a ~30% chance we lose.
  • It means there is a ~70% chance we win.

If you sell a “10 Delta” option, you have a 90% theoretical win rate.

2. Theta ($\Theta$): The Rent Collector

Theta measures how much money the option loses per day purely due to time passing.

• Theta = Cash per day.
• If you sell an option with a Theta of 0.05, you make $5 per day per contract, even if the stock price doesn’t move an inch.
• The Curve: Theta decay is not linear. It accelerates. The closer you get to expiration (0 days left), the faster the money melts into your pocket.

3. The Sniper Sweet Spot

We combine these two to find our trade:

1. Find a stock with a Bullish Chart (Week 1-3).
2. Go to the Option Chain.
3. Look for the 30 Delta strike price.
4. Check the Theta (ensure you are getting paid enough to wait).