The Greeks — Delta, Gamma, Theta, Vega & Rho

Overview

The Greeks quantify how an option's price responds to changes in the underlying, time, and volatility. Mastering them is essential for managing options risk. Pair your Greeks knowledge with a solid options risk management framework to protect your capital. For a hands-on feel, plug different scenarios into the options profit calculator and watch how delta, theta, and vega shift in real time.

Key Takeaways

• Delta: how much the option moves per $1 move in the stock. Calls: 0 to 1. Puts: -1 to 0.
• Gamma: rate of change of delta. Highest for ATM options near expiration — makes position sizing critical.
• Theta: time decay per day. Options lose value every day — accelerating in the final 30 days.
• Vega: sensitivity to implied volatility. Higher IV = higher option prices.

Practical Tips

• Use delta as a rough probability: 0.30 delta ≈ 30% chance of expiring ITM.
• If you're net long gamma, you profit from big moves. If net short gamma, you need the stock to stay still.
• Monitor your portfolio's net theta — it tells you how much you earn (or bleed) per day from time decay.