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Option Greeks Explained

The option Greeks help explain how an option position may react to changes in price, time, and volatility. They are a practical way to understand risk beyond the simple premium.

Delta

Delta measures how much an option price is expected to move relative to a change in the underlying asset.

Gamma

Gamma tells you how quickly delta may change as the underlying moves. It is often important near expiration or near the strike.

Theta

Theta reflects time decay. As expiration approaches, options may lose value if the price doesn't move in a favorable direction.

Vega

Vega shows how sensitive the option is to changes in implied volatility. Higher implied volatility can increase option value, even if the price hasn't moved much.

Rho

Rho reflects sensitivity to changes in interest rates and is usually a smaller factor for short-term trades than delta, theta, or vega.