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Sep 30, 2023 · Delta, gamma, vega, and theta are known as the "Greeks," and provide a way to measure the sensitivity of an option's price to various factors. For instance, the delta measures the sensitivity of ...
- 2 min
- Delta. Delta measures how much an option's price can be expected to move for every $1 change in the price of the underlying security or index. For example, a Delta of 0.40 means the option's price will theoretically move $0.40 for every $1 change in the price of the underlying stock or index.
- Gamma. Where Delta is a snapshot in time, Gamma measures the rate of change in an option's Delta over time. If you remember high school physics class, you can think of Delta as speed and Gamma as acceleration.
- Theta. Theta tells you how much the price of an option should decrease each day as the option nears expiration, if all other factors remain the same. This kind of price erosion over time is known as time decay.
- Vega. Vega measures the rate of change in an option's price per one-percentage-point change in the implied volatility of the underlying stock. (There's more on implied volatility below.)
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The greeks are an important part of options trading, as they tell you how changes in certain factors may impact the price of an option. So, let's get to know them. We'll start with delta. Like Zeus, delta is the ruler over all the other options greeks because it often has the biggest impact on the value of an option.
Feb 22, 2023 · The greeks are an important part of options trading, as they tell you how changes in certain factors may impact the price of an option. So, let's get to know them. We'll start with delta. Like Zeus, delta is the ruler over all the other options greeks because it often has the biggest impact on the value of an option.
Feb 13, 2024 · Options Greeks: Theta. "By definition, options are contracts that entitle the holder to buy or sell shares of the underlying asset at a specific price by a specific date," writes Volk in her ...
