Option Greeks Explained

Greeks summarize how an option’s price is expected to change when the market moves. Use them to understand risk — not as guarantees.

Delta (Δ)

Approximate change in option price for a $1 move in the underlying. Calls have positive delta (0 to 1 per share; 0 to 100 per contract). Puts have negative delta. Position delta = sum of leg deltas × contracts × 100 (convention varies by platform).

• ATM options ≈ ±0.50 delta.
• Deep ITM → delta toward ±1; deep OTM → toward 0.
• Often used as a rough probability-of-finishing-ITM proxy (not exact).

Gamma (Γ)

How fast delta changes as the stock moves. High gamma near ATM and short-dated options means your directional exposure can swing quickly — good for long options that catch a move, dangerous for short options.

Theta (Θ)

Expected daily decay of extrinsic value (often quoted as dollars per day). Long options usually have negative theta; short options positive. Spreads and calendars create nuanced theta profiles.

Vega (ν)

Sensitivity to a 1-point change in implied volatility. Long options/straddles are long vega (IV crush hurts). Short premium is short vega (IV crush helps). Earnings trades often revolve around vega.

Rho (ρ)

Sensitivity to interest rates. Usually a smaller factor for short-dated equity options than delta, theta, or vega.

Using Greeks with a calculator

Our payoff tools focus on price × date P/L. Pair that view with broker Greeks for live risk. Stress-test strikes and DTE on the Option calculator heatmap before sizing a trade.

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