Wednesday, July 05, 2006

Trading P.I.T. Session 2

Session 2 of the Trading P.I.T. with Bill Keevan was all about vertical spreads. We primarily focused on the Bull Call Spread because a vertical spread is a vertical spread, whether it's a Bull Call, Bull Put, Bear Put or Bear Call. Along with a recap of delta and how it affects option pricing Bill introduced us to Gamma also.

Gamma is often referred to as the second Greek. Second, of course, to Delta. Where Delta is a value that represents the change in option premium relative to the price of the underlying security, Gamma is a value that represents the rate at which the Delta will change. This can be described as the rate of change of the Delta. Delta captures the rate of change of the premium and Gamma captures the pace of the change.

Bill didn't spend a whole lot of time focusing on Gamma, instead we looked through practical applications and some spread setups against live market data. We already covered the basics of the Bull Call (Vertical) Spread and in Trading P.I.T. Session 1.

2 comments:

Anonymous said...

Hey Mark: I wanted to know if there was a TMTT discussion group out there and I found your site. Looks like we have followed similar paths. Had Rob as a coach and just finished Trading Pit. Working on scheduling my mentor training now. Trying to gain the confidence and grow in my trading as well. I will be checking in to see how things are going. I wish us both the best!!!

Best, Blazer

Trader Taocode said...

Stay tuned Blazer, I'll probably spearhead a discussion group for TMTT students. It's something I've been considering setting up for some time.