/options-analysis

description: Analyze options Greeks, implied volatility, and strategy selection for US stocks

Options Analysis

⚠️ Data Verification — Do This Before Any Analysis

Before running any analysis, always retrieve the latest market data for the ticker:

1. **Fetch current price** — use web search or ask the user for the live price, 52-week range, and market cap. Never assume a price from training data. 2. **Confirm key figures** — recent earnings, revenue, key ratios (P/E, P/S, etc.) as applicable to this skill. 3. **State your data source** — fill in the `Data & Sources` header (next section) so the origin, as-of date, retrieval path, and confidence of every figure are explicit at the top of the output. 4. **Flag stale data explicitly** — if live data is unavailable, display this warning before proceeding:

> ⚠️ **Live data unavailable.** The following analysis uses training-data estimates which may be significantly out of date. Verify all prices and metrics before making any decisions.

Never silently substitute training-data estimates for current prices. When in doubt, ask the user to paste the latest quote.

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📋 Data & Sources Header — Open Every Output With It

The first thing in the output is this provenance block, filled in — never left as placeholders. It is the standard documented on the [Data & Accuracy](https://yennanliu.github.io/InvestSkill/data-and-accuracy.html) page and the first thing `result-validator` looks for:

Data & Sources
  As of:      <date the figures represent, e.g. 2026-06-30>
  Source:     <primary docs — SEC EDGAR 10-K/10-Q, company IR, FRED, exchange data …>
  Retrieval:  <pasted by user | web/tool retrieval | model memory>
  Confidence: <HIGH | MEDIUM | LOW>

• `Retrieval: model memory` must be paired with `Confidence: LOW` — memory is a placeholder until confirmed against a primary source.
• Mixed sources: list each with its own as-of date rather than blending them.
• Sources disagree on the same figure (a closing price, a deal term): prefer the primary source (SEC filing, company release, exchange data) over an aggregator, then the most recent dated one. Show both values with their sources and dates, say which you used and why, and never average them.
• Data the user pasted is reported as `pasted by user`; do not upgrade its confidence beyond what the user's own source supports.

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Comprehensive analysis of options Greeks, implied volatility dynamics, strategy selection, and risk/reward frameworks for US-listed equity options. Designed to help identify optimal strategies based on market outlook, volatility environment, and underlying stock context.

**Risk Disclaimer**: Options involve significant leverage and can result in the loss of the entire premium paid or, for short options, losses substantially exceeding the initial credit received. This analysis is for educational and informational purposes only and does not constitute financial advice.

Analysis Framework

1. Options Basics and Context

**Core Terminology**

• **Strike price**: The price at which the option holder can buy (call) or sell (put) the underlying stock
• **Expiration date**: The date the option contract expires; American-style options can be exercised at any time before expiration
• **Premium**: The market price of the option contract (cost to buyer, credit received by seller)
• **Contract**: Represents 100 shares of the underlying stock
• **ITM (In-the-Money)**: Call with strike < stock price; Put with strike > stock price — has intrinsic value
• **ATM (At-the-Money)**: Strike approximately equal to current stock price
• **OTM (Out-of-the-Money)**: Call with strike > stock price; Put with strike < stock price — only time value, no intrinsic value

**Intrinsic Value vs. Time Value**

• Premium = Intrinsic Value + Time Value (Extrinsic Value)
• Intrinsic value: how far ITM the option is (cannot be negative)
• Time value: premium above intrinsic value — represents probability of further price movement and time remaining

**When to Use Options vs. Stock**

• **Leverage**: Control 100 shares with a fraction of the capital (calls vs. outright long)
• **Hedging**: Protect existing portfolio positions (protective puts, collars)
• **Income generation**: Sell covered calls or cash-secured puts to generate premium income
• **Volatility plays**: Profit from large moves (straddles) or stability (iron condors) regardless of direction
• **Defined risk**: Spreads cap maximum loss to the debit paid

2. The Greeks Analysis

**Delta (Δ) — Directional Sensitivity**

Definition: Change in option price for a $1 move in the underlying stock price.

Option Type      Delta Range      Moneyness Context
Call (long)      0 to +1.0        Deep OTM ≈ 0.05, ATM ≈ 0.50, Deep ITM ≈ 0.99
Put (long)       -1.0 to 0        Deep OTM ≈ -0.05, ATM ≈ -0.50, Deep ITM ≈ -0.99

• **Delta as probability proxy**: A 70-delta option approximates a 70% probability of expiring ITM (rough heuristic, not precise)
• **Position delta**: Sum of all delta exposure across a portfolio = total directional equivalent shares
• Directional traders: select delta matching conviction (high delta = high directional exposure, lower leverage; low delta = cheaper, more speculative)
• Delta hedging: offset option delta with opposite stock position to create delta-neutral portfolio

**Gamma (Γ) — Rate of Delta Change**

Definition: Rate of change of delta for a $1 move in the underlying.

• Gamma is highest for ATM options and increases dramatically as expiration approaches
• **Long gamma**: Long options positions (long calls or puts) — benefits from large moves in either direction; gamma accelerates gains as stock moves through strike
• **Short gamma**: Short options positions — benefits from stability and small moves; faces accelerating losses on large moves
• **Gamma risk at expiration**: ATM options near expiry have very high gamma — pin risk and rapid delta shifts
• **Gamma scalping**: Dynamically delta