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Option Greeks in Depth

To truly master options, one must understand the Greeks. These mathematical tools describe how options react to different market factors.

Delta (Δ) – Price Sensitivity

Measures how much an option price changes if stock moves ₹1.

Call options: Delta between 0 and +1.

Put options: Delta between 0 and -1.

Example: If a call has delta = 0.5, and stock rises ₹10, option rises ₹5.

Gamma (Γ) – Acceleration of Delta

Delta itself changes as stock moves. Gamma measures this.

High gamma = higher sensitivity, riskier.

Near expiry, gamma becomes extreme.

Theta (Θ) – Time Decay

Options lose value as time passes (all else equal).

Theta tells how much an option loses daily.

Example: If theta = -5, option loses ₹5/day.

Sellers love theta (they earn decay). Buyers fear it.

Vega (ν) – Volatility Sensitivity

Measures how option reacts to 1% change in volatility.

High volatility = high premium.

Example: If Vega = 10, and implied volatility rises 1%, option price rises ₹10.

Rho (ρ) – Interest Rate Sensitivity

Measures impact of interest rate changes.

Less important in short-term trading.

📌 Takeaway: Greeks are like the dashboard of a car. Without them, you’re driving blind.

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