Options Greeks Explained

The Greeks measure how option prices change based on various factors. Understanding them is essential for options trading.

Delta (Δ)

What it measures: How much option price changes per $1 move in stock

  • Call delta: 0 to 1.0
  • Put delta: 0 to -1.0
  • ATM options: ~0.50/-0.50

    • For covered calls: Lower delta = less assignment risk

    Theta (Θ)

    What it measures: How much option price decreases per day (time decay)

  • Always negative for option buyers
  • Accelerates as expiration approaches
  • Highest for ATM options

    • For sellers: Theta is your friend—you profit from time decay

    Gamma (Γ)

    What it measures: How much delta changes per $1 move in stock

  • Highest for ATM options near expiration
  • Causes delta to change rapidly

    • For sellers: High gamma = position can move against you quickly

    Vega (ν)

    What it measures: How much option price changes per 1% change in implied volatility

  • Higher for longer-dated options
  • Higher for ATM options

    • For sellers: High IV = more premium but more risk