The Option Greeks - Comprehensive Guides

Learn how to measure the primary risks of options by using the Greeks.

Option Risk #1: Delta

Option Greeks: Varying Delta Calls

Delta estimates an option's price change when the stock price rises or falls by $1. In other words, delta is used to gauge an option's directional exposure.

Option Risk #2: Gamma

Option Greeks: Gamma vs. Days to Expiration

An option's directional exposure changes when the stock price shifts. Gamma estimates how much an option's delta will change when the stock price rises or falls by $1.

Option Risk #3: Theta

Option Greeks: At-the-Money Theta Decay Example

The passage of time is the enemy of option buyers, and the best friend of option sellers. Theta estimates how much an option's price will fall with each day that passes.

Option Risk #4: Vega

Option Greeks: Vega vs. Days to Expiration

Implied volatility rises and falls with investor sentiment. Vega estimates an option's price sensitivity relative to changes in implied volatility.

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