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Trading Options Greeks: How Time, Volatility, and Other Pricing Factors Drive Profits, 2nd Edition by Dan Passarelli

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CHAPTER 4

Option-Specific Risk and Opportunity

New endeavors can be intimidating. The first day at a new job or new school is a challenge. Option trading is no different. When traders first venture into the world of options, they tend to start with what they know—trading direction. Buying stocks is at the heart of the comfort zone for many traders. Buying a call as a substitute for buying a stock is a logical progression. And for the most part, call buying is a pretty straightforward way to take a bullish position in a stock. But it’s not just a bullish position. The greeks come into play with the long call, providing both risk and opportunity.

Long ATM Call

Kim is a trader who is bullish on the Walt Disney Company (DIS) over the short term. ...

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