Item Grading Configuration

Summary

Need some inputs or setup documents on Item Grading

Content

I am trying to setup Item Grading.

There is very little mention of Item Grading and how it calculated in the documents. 

I have enabled Item Grading in the Manage Configurations in the task panel of Product Development.

When I create an Item -- the default grade is appealing blank -- hence not allowing me to save the item..

(Screenshot attached)

Any inputs on this?

Further I also want to know how these are calculated and any documentation around this will help.