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Option

Option Greeks are metrics that help traders understand how option prices move based on various factors such as time, volatility, and interest rates. Key Greeks include Delta, which measures price changes relative to the underlying stock; Gamma, which indicates Delta's sensitivity; Theta, which represents time decay; Vega, which assesses sensitivity to volatility; and Rho, which measures sensitivity to interest rates. These metrics are essential for making informed trading decisions.

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58 views7 pages

Option

Option Greeks are metrics that help traders understand how option prices move based on various factors such as time, volatility, and interest rates. Key Greeks include Delta, which measures price changes relative to the underlying stock; Gamma, which indicates Delta's sensitivity; Theta, which represents time decay; Vega, which assesses sensitivity to volatility; and Rho, which measures sensitivity to interest rates. These metrics are essential for making informed trading decisions.

Uploaded by

soulcorona3
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

OPTION

GREEKS
What is Option Greeks ?

Option Greeks help traders to


understand how price move
based on different factors
such as time, volatility,
interest rate etc.
Delta
(Underlying Price)

Delta measures how much option


price changes compare to
change in underlying stocks.

Example: If Delta is 0.5, the


option price will increase by
₹0.50 if the stock moves up by
₹1.
Gamma
(Delta’s Sensitivity)

Gamma measures how much


Delta changes when the stock
price moves.

It helps understand how stable


Delta is. Higher Gamma means
Delta will change quickly.
Theta
(Time)

Theta measures how much the


option loses in price as time
passes (Time Decay).

Example: If Theta is -0.05, the


option price will drop by ₹0.05
every day, even if nothing else
changes.
Vega
(Volatility)

Vega measures how much the


option price changes when
volatility increases. basically
option’s sensitivity to volatility

Higher Vega means the option


price will move more when
volatility rises.
Rho
(Interest Rates)

Measures how much the option


price changes with interest
rates (not very important for
short-term traders).

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