Options Greeks
What It Is
The Options Greeks are risk‑measurement tools that show how an option’s price responds to changes in market variables such as price, volatility, and time.
Why It Matters
They help traders understand risk exposure and manage option strategies more effectively.
How It Works
- Delta: Sensitivity to stock price changes
- Gamma: Rate of change of delta
- Theta: Time decay
- Vega: Sensitivity to volatility
- Rho: Sensitivity to interest rates
Key Components
- Price sensitivity
- Volatility impact
- Time decay
- Risk modeling
Example
A call option with a delta of 0.60 will gain $0.60 for every $1 increase in the stock price.
Key Takeaways
- Greeks quantify option risk.
- They guide strategy selection and adjustments.
- Mastery of Greeks improves trading precision.