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The Skinny on Options: Abstract Applications

Leaving the Continuous World

The Skinny on Options: Abstract Applications

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Most high-level mathematics assume a continuous state with the inputs and the outputs. In other words, the variables operate within an infinitely-fluid space, rather than a countable, discrete space. As retail traders that are making decisions in real-time, however, this is not super practical or useful. It makes far more sense for us to transform these continuous variables into discrete variables.

As we see today, with something like Theta, this provides us with an immediate benefit.

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