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.
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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Disclaimer
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Hello Everyone! 👋
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Feel free to ask any questions. I'm here to help!
Details:
Contact : +91 7678446896
Email: skytradingmod@gmail.com
WhatsApp: wa.me/7678446896
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.