Discuss (analyze) the delta and theta for the trade and why this makes sense rel
ID: 2787231 • Letter: D
Question
Discuss (analyze) the delta and theta for the trade and why this makes sense relative to your future
Monitor Trade Analyze Scan MarketWatch Charts Tools Education Help Hot Key Setup Add Simulated Trades Risk Profile Probability Analysis Economic Data thinkBack Fundamentals Commission: ExcludeLines: 1@ Expiration Step: NAMetric: P/L Open Prob mode: ITM Prob range: 68.27% Date: 01/20/2018 MSFT Drag chart to pan Drag prices to change scale Click chart for data 300 9.31% 81.43% N/A + 200 + 100 100 300 71 72 73 74 75 76 78 79 85 86 87 8B 93 95 Price slices P/L Open ($214.99 ($7.09 $267.14 P/L Day ($214.99 ($7.09) $267,14 BP Effect $500.00 $500.00 ($500.00 Stk Price 2.02 2.36 4.21 Vega 2.19 1.24 3.45 4.37 47.65 9,08 91.41% +10% .47 1036 1.00 Positions and Simulated Trades ALL Show All Date: 11/16/2017 «no selected. Single Symbol Side Model: Bjerksund-Stensland Interest: 0.75% · Spread SINGLE Qty Symbol Strike Type Yield 2.02% BP Effect MSFT 15 DEC 17 3.55T 17.68% 77.81Explanation / Answer
The ticker is MFST and this stands for Microsoft Corporation.
The delta associated with MFST is 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 MFST) goes down. The delta figure simply represents how much the option price of MFST 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 MFST are 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 MFST’s at-the-money option will decay over time.
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