Glossary
Option Greeks
Delta, gamma, theta, vega and rho: measures of how an option's price responds to changes in price, time, volatility and rates.
The option Greeks are a set of sensitivities, each named after a Greek letter (vega is the exception), that estimate how an option's price will change when one input to its value changes and the others stay put. Together they turn a single premium into a map of risks: direction, the speed of that exposure, time decay, volatility and interest rates. Traders use them to size positions, to hedge and to understand why an option gained or lost value on a given day.
The five main Greeks
| Greek | Measures the change in option price per… | Typical sign for a bought call / bought put |
|---|---|---|
| Delta | $1 move in the underlying | positive / negative |
| Gamma | $1 move, applied to delta itself | positive / positive |
| Theta | one day passing | negative / negative |
| Vega | 1-point change in implied volatility | positive / positive |
| Rho | 1-point change in interest rates | positive / negative |
Putting them together
Caveats
Greeks come from a pricing model, usually Black-Scholes or a variant, fed with implied volatility. They are local estimates that hold for small changes; large moves, earnings events and approaching expiration can change them quickly. They also interact: an at-the-money option near expiry has high gamma and high theta at the same time. A position's total Greeks are the sum of each leg's Greeks times the number of contracts and the multiplier.