Playing With Volatility? Get to Know ‘The Greeks’

A lot of people picked up a hobby to pass the time during the Covid-19 pandemic. Some learned how to bake bread; others dusted off musical instruments. For many, however, it was something a little less folksy: equity derivatives. As trading volumes for options exploded, newbie investors have been encountering concepts such as volatility that make sourdough seem simple. Here’s a guide to some of them.

That’s the size of the swings in prices for a stock, index, or other tradable instrument. For nontraders, volatility may sound ­intuitively bad—the way storms at sea are bad. But to traders, all winds are opportunities to travel somewhere. And the stronger the better.