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How Long Will It Take to Learn How to Trade?
You’ve heard about the stock market and how great it can be. You’ve heard how you can sit at home in your underwear and make money online trading without ever needing to get dressed? All these things are certainly true; however, the big question I get on a routine basis is how long will it take me to learn how to trade? On the surface it seems like a simple and to-the-point question, but it’s actually a quite complex thing to answer for the reasons I discuss in this video.
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Hey Clay, how long is it gonna take me
to learn how to trade?
I get this question all the time
and in the spirit of time efficiency on my part,
I just wanna make a video that I can now link
those people to, so, let’s talk about it,
how long is it gonna take?
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Before I even get into answering this question,
a big old warning, first off, and you gotta be honest
with yourself because only you can truly answer
this question and so quick self-audit,
are you asking this question because I just wanna
get started now, now, now, now?
Or I need money now, now, now, now.
Let’s just go go go go.
There’s a big difference between enthusiasm
and then flat out rushing and greed
and an example, if you just lost your job,
you have a family, and you’re asking me,
Clay, how long is it gonna take me
’cause I need to provide for my family,
I need to put food on the table.
So, if you’re asking out of that regard,
go find another job, your best trade is going to be
putting in applications and finding a new job.
Now, if you’re just asking out of moreso hey,
I’m just kind of, just wondering, I’m not in a rush,
I don’t need to pay the gas man, you know,
the gas collectors aren’t knocking on my door,
wondering, you’re asking your significant other,
did you pay the gas bill?
Does anybody know what movie that’s from?
Did you pay the gas bill?
Do you realize what you’ve done?
Okay, anyways, I’m sidetracking myself.
Seriously, though, leave the movie quote
or leave the movie down below.
Anyways, are you approaching it because of a need?
I gotta get started now, now, now,
or just more out of curiosity, just an FYI.
So, that’s kind of the first question
to just kind of throw out.
Now, if you are asking it just because you’re wondering,
in general, and you’re not needing the money,
you don’t need to pay the gas bill or anything like that,
then, I have no idea.
Sorry, I realize that’s kind of a shady answer
but I’m gonna explain why I’m being so shady
and why nobody, nobody, nobody can answer that
and even if they tried to in a certain way,
why it’s really risky to do that.
So, let’s just kind of explain why that’s the case
and the best way to do this is to tell a little story.
So, we have Billy Bob over here, we’ll call him BB.
Billy Bob is single,
and he’s got a job and it’s just a part time job.
But, you know, he’s single, lives alone,
so it’s not like he has costs all over the place,
he doesn’t have a family to support,
nothing like that.
Then over here, that’s supposed to be some hair,
we have Sally Sue.
Sally Sue is a mom,
she’s also single,
and she has four kids.
Now, looking at these two people,
just right at the get go,
who do you think is probably going to have more time
to learn how to trade?
He’s single, he lives alone, he doesn’t have to support
anybody, you get the point.
Over here, you have Sally Sue who’s a single mom
Now, am I sitting here saying that, sorry, Sally Sue,
you will never be able to learn how to trade in the markets?
I’m not saying that at all
but remember, the question is, how long?
If I were to wager, I’d say, well,
Billy Bob is probably going to do it a little bit quicker
because he has more time but even with that,
that’s not necessarily true.
Why is this not necessarily true?
Well, then you have these other things going on down here.
So, you have just kind of the time component
and then within the time component you have
ability to absorb info.
Or, in other words, how easy do people learn?
For all we know, maybe Billy Bob just needs to take
a little bit more time.
Maybe Sally Sue is like borderline genius
and if that was the case, well, then, Sally Sue,
even though she doesn’t have as much time,
because she learns so much quicker than most people,
she may still be able to learn quicker than Billy Bob.
So, as you can see, there’s many variables
to the equation here.
Not only from a time perspective
but then the ability to learn.
Take me, for example, I did get an engineering degree,
I am an engineer by degree, although no longer practicing,
so, by no means am I calling myself a rocket scientist
but yeah I’m a relatively smart guy.
However, in school I was always the guy where other people
were like, you going out tonight?
You going out tonight?
And you overhear and I’m thinking,
how can you guys be going out?
I gotta do all this studying,
I gotta figure out what the heck’s even going on.
I can learn, I can absorb information,
but it definitely took me and takes me longer
than other people.
I mean, thinking back to my ACT scores and my SAT scores,
ooh man, those things were not very pleasant
but that’s just the way my mind works.
I need, just give me time to figure something out,
that’s all I ask for time and, obviously,
with standardized tests, there’s not,
time is of the essence.
So, from my perspective, I am definitely somebody that
I don’t absorb information,
I can’t learn as quick as others,
but I can learn and I’m very capable,
I just need time and then on top of all this,
you have the other layer which is work ethic.
So, somebody could have all the time in the world,
be super, super smart, but if they’re work ethic’s
like ehh ehh, then it’s still gonna take them longer
than somebody that I think you get all the different
variables that go into this.
So, I have no idea how long it’s going to take you
but then this is the thing that I’ve had people say
which is valid, I can see where they’re asking,
Clay, what is the average amount of time
that it can take?
You know, all these different things.
This is basically the dumbest thing
that people can really respond to or give you.
And anybody that’s telling you an average red flag,
run away, run away, because there’s no way,
do you honestly think that they have some sort of
data system where they, you know, how long it takes
every, don’t fall for it.
And the other reason not to fall for it
is now you have to worry about, let’s just say, for example,
somebody says oh, on average, with my system,
you’re gonna learn and become profitable in, I don’t know,
let’s just say one week.
Well, what happens if, for Billy Bob,
it’s two weeks all of a sudden?
Not when his mind is thinking oh great, I am, what?
And trading is already mentally taxing enough,
there’s already plenty of voices and mental components
that are going on, the last thing you need
is to now think, pfft, wa wa, I’m below average.
No, you gotta stay positive,
you have to believe in yourself the whole time
and setting marks like this are just gonna cause
people to rush because, I don’t know about you
but I don’t wanna be below average,
I wanna be at least average, if not better,
and most people that get into trading,
they’re competitors and they wanna be above average
but if people are throwing just random averages at you
and then all of a sudden you’re approaching
that time mark because it’s totally arbitrary,
it’s just these people are making it up,
you’re gonna start rushing, you’re gonna self-pressing,
you’re gonna start, you’re just gonna rush yourself
and it’s not gonna turn out well,
you’re understanding is going to be corrupted
because you’re just rushing way too fast.
So, how long does it take to learn?
I have no idea but the good news is
the stock market is not going anywhere.
It’ll be here tomorrow, it’ll be here three months from now,
it’ll be here three years from now.
Maybe something will change but as far as the track record
of the past 200 years, the stock market will be around
so there’s no need to rush, just take your time.
How long will it take?
For those that are just asking out of curiosity,
I can’t answer that out of good conscious
because I know nothing about your situation,
I know nothing about your ability to learn,
I know nothing about your work ethic
and even if I did, there’s still other variables
that are just flying around where it’s impossible
to answer how long does it take to learn how to trade.
So, as you come into it, just understand,
you better have passion for it, you better have a desire
to learn, and you better just have patience
and know that there is no average, just do your thing,
learn at your pace, and go about things,
whatever you feel most comfortable with,
and just kind of go with the flow.
If you are out there trading alone currently
and maybe are in the market looking for a community to join
to assist you in your trading or to just help you,
give you another set of eyeballs,
then I do have a private trading community
where you can trade alongside me
and other experienced traders.
So, what you see popping up on the screen right now
is both an information link, so, if you click on
the Inner Circle one, that is going to take you
to the page where I explain all the details
of what exactly come with the community,
both the chatroom and the newsletter,
and then the other image that has popped up
is a behind the scenes tour where you can see
exactly what is going to be contained within the community,
I take you through, like I said, a behind the scenes tour
of everything and that way you’ll know precisely
what you are getting when you join.
So, definitely check that stuff out
if you are interested and thinking about wanting to join
a community and let me know if you have any questions.
Are you able to have only 1 losing day out of 73 days trading?
NO? Attend my free “1 Hour Trading Transformation” training event to learn how you can!
How Long Does It Really Take To Learn How To Code?
Becoming a freelancer, making your own hours as your own boss, all while earning a high paying and comfortable salary while working in tech sounds awesome. Not only does it sound awesome but it is also a very real reality for many freelance developers. The big question that everyone interested in coding asks is, “How long does it take to learn how to code?”.
The great thing about deciding to work in tech is that you get to choose which tech role you want to pursue based off of the type of lifestyle you want to create for yourself. So depending on which way you choose to go can highly influence the amount of time it will take to get there.
What we want to anyone who is interested in coding to understand most of all is that learning to code is not about how many hours you put in. It all depends on your passion, willpower, and an end goal that will determine how fast your grab on to the fundamentals. If your purpose for learning how to code is to earn a high salary and I can just about guarantee you that your motivation will dwindle quite quickly.
A really awesome and down to earth perspective from CTO and co founder of FireHose, Ken Mazaika “There isn’t going to be this one point in time where everything fundamentally changes and you’re a fundamentally different programmer…The fact of the matter is you shouldn’t be counting the hours and you shouldn’t be expecting that at one point in time you’re going to be a fundamentally different developer. If you want to be able to contribute to a startup you’re going to have to learn every single day that you’re in the office. And there’s not going to be this magical moment where you feel “Oh my God. Everything has changed.”
What many beginners don’t understand is that learning to code is an ongoing process that will continue while you’re on the job. Many well experienced senior developers will honestly tell you that they still have so much to learn. And while this truth may seem daunting it should actually be encouraging. When you walk into your first coding lesson with not only clearly defined goals but also a continuous learning mindset you will be able to push through any obstacle.
The first step to learning how to code is becoming a Junior Developer. One of the best places to start your journey to becoming a junior developer is through a coding bootcamp where you’ll learn with others who are on the same level as you all the current and marketable tech skills you need in a short period of time. It is here you will develop your coding fundamentals and base that you will build off of. Whether through your own freelance projects or through your first job at a startup this is where you will really learn and grow your coding skills. The amount of time it takes to develop a solid base in coding depends on which language you are learning and the amount of time you put into learning and practicing code. Those who have a true passion and purpose for coding normally take about 3 months to learn before starting real life projects with clients. It’s important to note that the world of coding is a constantly evolving industry and keeping up with industry changes and updates is key. Interested in more info?
At KeepCoding we teach our students how to create their dream apps and create the kind of content they want. We want to help people see their creations come to life to enter this thriving market. Interested in becoming part of the KeepCoding family with over 15,000 alumni worldwide? Come check us out!
Starting this upcoming Fall, KeepCoding will be offering online courses from Silicon Valley for practically free in B-Learning Format (onsite+online+offsite) in order to help entrepreneurs and students develop their dreams apps and websites.
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Want to keep up to date with the latest tech trends and whats going on in the tech world? Don´t worry, we got you. For all our nerds out there we have our weekly Nerdsletter ! Subscribe here!
Essential Options Trading Guide
Options trading may seem overwhelming at first, but it’s easy to understand if you know a few key points. Investor portfolios are usually constructed with several asset classes. These may be stocks, bonds, ETFs, and even mutual funds. Options are another asset class, and when used correctly, they offer many advantages that trading stocks and ETFs alone cannot.
- An option is a contract giving the buyer the right, but not the obligation, to buy (in the case of a call) or sell (in the case of a put) the underlying asset at a specific price on or before a certain date.
- People use options for income, to speculate, and to hedge risk.
- Options are known as derivatives because they derive their value from an underlying asset.
- A stock option contract typically represents 100 shares of the underlying stock, but options may be written on any sort of underlying asset from bonds to currencies to commodities.
What Are Options?
Options are contracts that give the bearer the right, but not the obligation, to either buy or sell an amount of some underlying asset at a pre-determined price at or before the contract expires. Options can be purchased like most other asset classes with brokerage investment accounts.
Options are powerful because they can enhance an individual’s portfolio. They do this through added income, protection, and even leverage. Depending on the situation, there is usually an option scenario appropriate for an investor’s goal. A popular example would be using options as an effective hedge against a declining stock market to limit downside losses. Options can also be used to generate recurring income. Additionally, they are often used for speculative purposes such as wagering on the direction of a stock.
There is no free lunch with stocks and bonds. Options are no different. Options trading involves certain risks that the investor must be aware of before making a trade. This is why, when trading options with a broker, you usually see a disclaimer similar to the following:
Options involve risks and are not suitable for everyone. Options trading can be speculative in nature and carry substantial risk of loss.
Options as Derivatives
Options belong to the larger group of securities known as derivatives. A derivative’s price is dependent on or derived from the price of something else. As an example, wine is a derivative of grapes ketchup is a derivative of tomatoes, and a stock option is a derivative of a stock. Options are derivatives of financial securities—their value depends on the price of some other asset. Examples of derivatives include calls, puts, futures, forwards, swaps, and mortgage-backed securities, among others.
Call and Put Options
Options are a type of derivative security. An option is a derivative because its price is intrinsically linked to the price of something else. If you buy an options contract, it grants you the right, but not the obligation to buy or sell an underlying asset at a set price on or before a certain date.
A call option gives the holder the right to buy a stock and a put option gives the holder the right to sell a stock. Think of a call option as a down-payment for a future purpose.
Call Option Example
A potential homeowner sees a new development going up. That person may want the right to purchase a home in the future, but will only want to exercise that right once certain developments around the area are built.
The potential home buyer would benefit from the option of buying or not. Imagine they can buy a call option from the developer to buy the home at say $400,000 at any point in the next three years. Well, they can—you know it as a non-refundable deposit. Naturally, the developer wouldn’t grant such an option for free. The potential home buyer needs to contribute a down-payment to lock in that right.
With respect to an option, this cost is known as the premium. It is the price of the option contract. In our home example, the deposit might be $20,000 that the buyer pays the developer. Let’s say two years have passed, and now the developments are built and zoning has been approved. The home buyer exercises the option and buys the home for $400,000 because that is the contract purchased.
The market value of that home may have doubled to $800,000. But because the down payment locked in a pre-determined price, the buyer pays $400,000. Now, in an alternate scenario, say the zoning approval doesn’t come through until year four. This is one year past the expiration of this option. Now the home buyer must pay the market price because the contract has expired. In either case, the developer keeps the original $20,000 collected.
Call Option Basics
Put Option Example
Now, think of a put option as an insurance policy. If you own your home, you are likely familiar with purchasing homeowner’s insurance. A homeowner buys a homeowner’s policy to protect their home from damage. They pay an amount called the premium, for some amount of time, let’s say a year. The policy has a face value and gives the insurance holder protection in the event the home is damaged.
What if, instead of a home, your asset was a stock or index investment? Similarly, if an investor wants insurance on his/her S&P 500 index portfolio, they can purchase put options. An investor may fear that a bear market is near and may be unwilling to lose more than 10% of their long position in the S&P 500 index. If the S&P 500 is currently trading at $2500, he/she can purchase a put option giving the right to sell the index at $2250, for example, at any point in the next two years.
If in six months the market crashes by 20% (500 points on the index), he or she has made 250 points by being able to sell the index at $2250 when it is trading at $2000—a combined loss of just 10%. In fact, even if the market drops to zero, the loss would only be 10% if this put option is held. Again, purchasing the option will carry a cost (the premium), and if the market doesn’t drop during that period, the maximum loss on the option is just the premium spent.
Put Option Basics
Buying, Selling Calls/Puts
There are four things you can do with options:
- Buy calls
- Sell calls
- Buy puts
- Sell puts
Buying stock gives you a long position. Buying a call option gives you a potential long position in the underlying stock. Short-selling a stock gives you a short position. Selling a naked or uncovered call gives you a potential short position in the underlying stock.
Buying a put option gives you a potential short position in the underlying stock. Selling a naked, or unmarried, put gives you a potential long position in the underlying stock. Keeping these four scenarios straight is crucial.
People who buy options are called holders and those who sell options are called writers of options. Here is the important distinction between holders and writers:
- Call holders and put holders (buyers) are not obligated to buy or sell. They have the choice to exercise their rights. This limits the risk of buyers of options to only the premium spent.
- Call writers and put writers (sellers), however, are obligated to buy or sell if the option expires in-the-money (more on that below). This means that a seller may be required to make good on a promise to buy or sell. It also implies that option sellers have exposure to more, and in some cases, unlimited, risks. This means writers can lose much more than the price of the options premium.
Why Use Options
Speculation is a wager on future price direction. A speculator might think the price of a stock will go up, perhaps based on fundamental analysis or technical analysis. A speculator might buy the stock or buy a call option on the stock. Speculating with a call option—instead of buying the stock outright—is attractive to some traders since options provide leverage. An out-of-the-money call option may only cost a few dollars or even cents compared to the full price of a $100 stock.
Options were really invented for hedging purposes. Hedging with options is meant to reduce risk at a reasonable cost. Here, we can think of using options like an insurance policy. Just as you insure your house or car, options can be used to insure your investments against a downturn.
Imagine that you want to buy technology stocks. But you also want to limit losses. By using put options, you could limit your downside risk and enjoy all the upside in a cost-effective way. For short sellers, call options can be used to limit losses if wrong—especially during a short squeeze.
How Options Work
In terms of valuing option contracts, it is essentially all about determining the probabilities of future price events. The more likely something is to occur, the more expensive an option would be that profits from that event. For instance, a call value goes up as the stock (underlying) goes up. This is the key to understanding the relative value of options.
The less time there is until expiry, the less value an option will have. This is because the chances of a price move in the underlying stock diminish as we draw closer to expiry. This is why an option is a wasting asset. If you buy a one-month option that is out of the money, and the stock doesn’t move, the option becomes less valuable with each passing day. Since time is a component to the price of an option, a one-month option is going to be less valuable than a three-month option. This is because with more time available, the probability of a price move in your favor increases, and vice versa.
Accordingly, the same option strike that expires in a year will cost more than the same strike for one month. This wasting feature of options is a result of time decay. The same option will be worth less tomorrow than it is today if the price of the stock doesn’t move.
Volatility also increases the price of an option. This is because uncertainty pushes the odds of an outcome higher. If the volatility of the underlying asset increases, larger price swings increase the possibilities of substantial moves both up and down. Greater price swings will increase the chances of an event occurring. Therefore, the greater the volatility, the greater the price of the option. Options trading and volatility are intrinsically linked to each other in this way.
On most U.S. exchanges, a stock option contract is the option to buy or sell 100 shares; that’s why you must multiply the contract premium by 100 to get the total amount you’ll have to spend to buy the call.
|What happened to our option investment|
|May 1||May 21||Expiry Date|
The majority of the time, holders choose to take their profits by trading out (closing out) their position. This means that option holders sell their options in the market, and writers buy their positions back to close. Only about 10% of options are exercised, 60% are traded (closed) out, and 30% expire worthlessly.
Fluctuations in option prices can be explained by intrinsic value and extrinsic value, which is also known as time value. An option’s premium is the combination of its intrinsic value and time value. Intrinsic value is the in-the-money amount of an options contract, which, for a call option, is the amount above the strike price that the stock is trading. Time value represents the added value an investor has to pay for an option above the intrinsic value. This is the extrinsic value or time value. So, the price of the option in our example can be thought of as the following:
|Premium =||Intrinsic Value +||Time Value|
In real life, options almost always trade at some level above their intrinsic value, because the probability of an event occurring is never absolutely zero, even if it is highly unlikely.
Types of Options
American and European Options
American options can be exercised at any time between the date of purchase and the expiration date. European options are different from American options in that they can only be exercised at the end of their lives on their expiration date. The distinction between American and European options has nothing to do with geography, only with early exercise. Many options on stock indexes are of the European type. Because the right to exercise early has some value, an American option typically carries a higher premium than an otherwise identical European option. This is because the early exercise feature is desirable and commands a premium.
There are also exotic options, which are exotic because there might be a variation on the payoff profiles from the plain vanilla options. Or they can become totally different products all together with “optionality” embedded in them. For example, binary options have a simple payoff structure that is determined if the payoff event happens regardless of the degree. Other types of exotic options include knock-out, knock-in, barrier options, lookback options, Asian options, and Bermudan options. Again, exotic options are typically for professional derivatives traders.
Options Expiration & Liquidity
Options can also be categorized by their duration. Short-term options are those that expire generally within a year. Long-term options with expirations greater than a year are classified as long-term equity anticipation securities or LEAPs. LEAPS are identical to regular options, they just have longer durations.
Options can also be distinguished by when their expiration date falls. Sets of options now expire weekly on each Friday, at the end of the month, or even on a daily basis. Index and ETF options also sometimes offer quarterly expiries.
Reading Options Tables
More and more traders are finding option data through online sources. (For related reading, see “Best Online Stock Brokers for Options Trading 2020”) While each source has its own format for presenting the data, the key components generally include the following variables:
- Volume (VLM) simply tells you how many contracts of a particular option were traded during the latest session.
- The “bid” price is the latest price level at which a market participant wishes to buy a particular option.
- The “ask” price is the latest price offered by a market participant to sell a particular option.
- Implied Bid Volatility (IMPL BID VOL) can be thought of as the future uncertainty of price direction and speed. This value is calculated by an option-pricing model such as the Black-Scholes model and represents the level of expected future volatility based on the current price of the option.
- Open Interest (OPTN OP) number indicates the total number of contracts of a particular option that have been opened. Open interest decreases as open trades are closed.
- Delta can be thought of as a probability. For instance, a 30-delta option has roughly a 30% chance of expiring in-the-money.
- Gamma (GMM) is the speed the option is moving in or out-of-the-money. Gamma can also be thought of as the movement of the delta.
- Vega is a Greek value that indicates the amount by which the price of the option would be expected to change based on a one-point change in implied volatility.
- Theta is the Greek value that indicates how much value an option will lose with the passage of one day’s time.
- The “strike price” is the price at which the buyer of the option can buy or sell the underlying security if he/she chooses to exercise the option.
Buying at the bid and selling at the ask is how market makers make their living.
The simplest options position is a long call (or put) by itself. This position profits if the price of the underlying rises (falls), and your downside is limited to loss of the option premium spent. If you simultaneously buy a call and put option with the same strike and expiration, you’ve created a straddle.
This position pays off if the underlying price rises or falls dramatically; however, if the price remains relatively stable, you lose premium on both the call and the put. You would enter this strategy if you expect a large move in the stock but are not sure which direction.
Basically, you need the stock to have a move outside of a range. A similar strategy betting on an outsized move in the securities when you expect high volatility (uncertainty) is to buy a call and buy a put with different strikes and the same expiration—known as a strangle. A strangle requires larger price moves in either direction to profit but is also less expensive than a straddle. On the other hand, being short either a straddle or a strangle (selling both options) would profit from a market that doesn’t move much.
Below is an explanation of straddles from my Options for Beginners course:
And here’s a description of strangles:
How to use Straddle Strategies
Spreads & Combinations
Spreads use two or more options positions of the same class. They combine having a market opinion (speculation) with limiting losses (hedging). Spreads often limit potential upside as well. Yet these strategies can still be desirable since they usually cost less when compared to a single options leg. Vertical spreads involve selling one option to buy another. Generally, the second option is the same type and same expiration, but a different strike.
A bull call spread, or bull call vertical spread, is created by buying a call and simultaneously selling another call with a higher strike price and the same expiration. The spread is profitable if the underlying asset increases in price, but the upside is limited due to the short call strike. The benefit, however, is that selling the higher strike call reduces the cost of buying the lower one. Similarly, a bear put spread, or bear put vertical spread, involves buying a put and selling a second put with a lower strike and the same expiration. If you buy and sell options with different expirations, it is known as a calendar spread or time spread.
Combinations are trades constructed with both a call and a put. There is a special type of combination known as a “synthetic.” The point of a synthetic is to create an options position that behaves like an underlying asset, but without actually controlling the asset. Why not just buy the stock? Maybe some legal or regulatory reason restricts you from owning it. But you may be allowed to create a synthetic position using options.
A butterfly consists of options at three strikes, equally spaced apart, where all options are of the same type (either all calls or all puts) and have the same expiration. In a long butterfly, the middle strike option is sold and the outside strikes are bought in a ratio of 1:2:1 (buy one, sell two, buy one).
If this ratio does not hold, it is not a butterfly. The outside strikes are commonly referred to as the wings of the butterfly, and the inside strike as the body. The value of a butterfly can never fall below zero. Closely related to the butterfly is the condor – the difference is that the middle options are not at the same strike price.
Because options prices can be modeled mathematically with a model such as the Black-Scholes, many of the risks associated with options can also be modeled and understood. This particular feature of options actually makes them arguably less risky than other asset classes, or at least allows the risks associated with options to be understood and evaluated. Individual risks have been assigned Greek letter names, and are sometimes referred to simply as “the Greeks.”
Below is a very basic way to begin thinking about the concepts of Greeks:
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