How To Maximize Earnings From Two Important Options Greeks? Delta and Theta

As per the definition, options Greeks are the interrelation between factors that can affect the options premium. Therefore, understanding the option Greeks is essential for investors to learn about the options premium movement and plan their options strategies accordingly. However, understanding options in Greek is fairly difficult, and you must learn them one by one.

Delta and Theta are the two most important option greeks that have huge potential to calculate the options premium. Also, an options trading app can help you with option greeks. And here, we will help you understand how you can maximize your earnings from these two options greeks. So, keep reading.

What is Delta?

Delta is one of the primary options Greeks that can help you effectively increase your options profit. Delta is a measurement of changes in the options premium or price depending on the change in the option's underlying security.

Delta value ranges from 0 to 100 for calls and 100 to 0 for puts. Calls generate a positive delta as they have a positive relationship with the underlying security of the options. Hence, when the underlying security rises, the call premium rises; when the underlying security falls, the call premium also falls.

On the other hand, puts have a negative relation with the underlying security of the options. Therefore, when the underlying security falls, the put's premium rises and vice versa. And the Algo trading apps, based on algorithm trading, can help you understand the scope and utilize delta to make the most of your options trading.

How To Use Delta for Maximum Earnings

Using delta can be a great way to increase the earnings from your options trading. It is essential to look at the delta of an option before making a choice. Observing the delta of both call strike and put options helps you judge your options better, as each has its delta and can indicate the price or premium movement.

Therefore, when you analyze the delta of the puts and calls, you can choose a reasonably favorable option for your investment. Delta will help you identify the best options to invest your money or purchase the premium for the most returns. Also, you can easily implement delta measurement in your opinions trading if you use an options strategy builder app or options trading app.

The Directional Risk and Delta

Delta can also help you determine directional risk. The negative deltas are short market assumptions, positive deltas are long market assumptions, and neutral deltas are neutral market assumptions. So, when you purchase a put, you want a negative delta, as the premium price will reduce if the option's underlying security falls. And if you purchase a call, you want a positive delta where the option premium price will increase if the underlying security rises.

For example, if you buy a call option of 2.00 with a .50 delta, the premium or price of the option will move 50% up/down when the underlying security falls/rises.

Things You Must Remember While Using Delta To Maximise Earnings

  • Delta of an ATM option tends to increase when the expiration date is near.

  • The implied volatility change can also affect the delta of an option.

  • Delta can also be calculated with a gamma that measures the delta's rate of change.

READ MORE: What is Gamma in Options Trading?

What is Theta?

Theta is another crucial option greek that you must learn if you are willing to increase your earnings from your options trading. Theta is a measurement of time decay in options premium/ price value depending on the changes in the underlying security of that particular option.

Time decay refers to the debilitation of the price or value of an option due to passing time. With time, the possibility of earning profit (or being profitable) from an option reduces. Also, the time decay accelerates when the option's expiration date is close, as it does not have much time left to fetch profit from the trade.

And unlike delta, Theta is always negative for one option as the time moves in one direction, and the price of the option begins to fall right from the time of purchase and continues until the expiration date. Therefore, Theta is always beneficial for a seller but bad for the buyer.

Understanding Theta is pretty straightforward if you purchase a 2000 call option at the rate of 980 underlying security, at the cost of 20 INR premium, and the Theta is 1. And when your purchase crosses one day, your option’s premium will be reduced to 19 INR. An options trading app helps utilize Theta.

How To Use Theta To Maximise Earnings

Theta is similar to Delta in terms of inconsistency and correlation with the underlying security of the options; the only difference between them is Delta measures the price, and theta measures time decay. In addition, Theta is always negative as time moves in only one direction. Therefore, when you observe Theta, you can learn about the option's possible price or value reduction.

Learning about the Theta will help you understand how long you can hold an option and use the stop-loss strategies to reduce investment risks. Also, an options auto adjustment strategy can help you implement delta measurement in your opinions trading to make the most out of your investments.

Things You Must Remember While Using Theta To Maximise Earnings

  • Theta always increases the most when the option is close to the expiration date, as there is very little time to earn from the trade.

  • Also, the price can be high for the OTM options with high implied volatility.

  • And the highest Theta comes with the ATM options as they have less time to earn profit from the options trade. And if you are using a options Algo app, it can help you identify suitable theta options for trading.


Delta plays a crucial role in measuring the price movement of the options. However, just like the price, time also plays a crucial role in options trading, as premiums of an option call or put can go down with time. Therefore, to maximize your options trading earnings, you must evaluate these option greeks before making the final decision.

Moreover, you can also use the options auto adjustment strategy, which you can get in an options strategy builder app to guide you to make full use of these options greeks to maximize your earnings.

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How To Maximize Earnings From Two Important Options Greeks? Delta and Theta
Aashutosh C 13 February, 2023
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