Discuss (analyze) the delta and theta for the trade and why this makes sense rel

Question

Discuss (analyze) the delta and theta for the trade and why this makes sense relative to your future

Option BP- $410,208.96 Stock BP $820,417.92 Net Liq- $584,425.06 Forex BP $10,000.00 DT Left 3 Cash & Sweep Vehicle $931,474.96 Monitor Trade Analyze Scan Marketwatch Charts Tools Education Help +Add Simulated Trades ! Risk Profile Probability Analysis Economic Data thinkBack Fundamentals MDT Hot Key Setup Commission: Exclude Lines: +1@ Expiration Step: NAMetric: P/L Open Prob mode: ITM Prob range: 68.27%:- Date: 11/16/2017 Drag chart to pan Drag prices to change scale Click chart for data + 20K 0.00 100.00 0.00 +15K + 10K 5K SK 10K 58 70 72 73 74 75 76 78 79 80 85 86 87 89 90 Price Slices Delta 359.40 935.87 997.94 Theta 28.26 11.24 282 Vega 92.66 27.81 12 P/L Open ($5,503.32 ($76.60 $7.673.66 P/L Day $5,503.32 ($76.60 $7.673.66 BP Effect $0.00 $0.00 $0.00 Stk Price 86.556 78.68$ 70.81 s 85.70 30.93 15 10% Positions and Simulated Trades ALL Show All sno selected, Single Symbol Model: Bjerksund-Stensland Interest: 0.75%: Date: 11/16/2017 ide Qty Symbol Strike Type Price ield Vol BP Effect MD 0.00

Explanation / Answer

The stock being analyzed is BP (as indicated by its ticker in the top left hand corner of the image).

The delta associated with BP are all negative. This means that positions that are associated with negative delta will increase in value if the underlying (i.e. the stock price of BP) goes down. The delta figure simply represents how much the option price of BP will change if the stock moves by $1.

Theta is the amount that the price of options will decrease for a one day change in time to expiration. As stock prices of BP is rising its theta is decreasing.

Analysis of delta and theta makes sense relative to future as an investor, who is bearish on the market, will want to put on positions that have a negative delta. Theta indicates how the value of BP’s at-the-money option will decay over time.

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