This episode focuses on the mechanics of options contracts and the use of "Greeks"—delta, gamma, theta, vega, and rho—to understand and manage risk. It explains the rights and obligations of buyers and sellers of options, different types of option strategies (e.g., buying and selling calls and puts, covered calls), and how various market factors (time, volatility, interest rates, dividends) affect option pricing. The text also covers concepts like put-call parity and synthetics to demonstrate relationships between options and how to construct more complex strategies. Finally, it discusses implied volatility and its relationship to historical volatility.
