📊 Option Greeks

Options trading isn’t just about direction – it’s also about how price, time, and volatility affect your position. That’s where Option Greeks come in.

Think of the Greeks as tools that help you measure the sensitivity of your option to different factors.

Let’s dive into the 5 major Greeks:

🔵 1. Delta (Δ) – Direction Detector

What it means:
Delta measures how much the option price moves when the underlying stock price changes by ₹1.

• ✅ Call Option Delta: +ve (between 0 to 1)
• 🔻 Put Option Delta: -ve (between 0 to -1)

Example:
If a call option has Delta = 0.5, and the stock moves ₹1 up, the option will move ₹0.50 up.

Why it matters:
Delta tells you how sensitive your option is to price movements and also acts like a probability indicator.
Delta 0.7 ≈ 70% chance the option will finish In-the-Money.

⏳ 2. Theta (Θ) – Time Decay Killer

What it means:
Theta shows how much value your option loses every day as expiry gets closer. Time is your enemy (for buyers) and your friend (for sellers).

• 📉 Option loses value daily due to time decay
• 📆 Decay is faster near expiry

Example:
If Theta = -5, your option will lose ₹5 in value each day – even if the stock price doesn’t move.

Who benefits?
Option sellers – they profit as the time value erodes.

⚡ 3. Vega (V) – Volatility Volcano

What it means:
Vega measures how much the option price will change with a 1% change in implied volatility (IV).

• 💥 High Vega = option price sensitive to volatility
• 📈 Higher volatility = costlier options

Example:
If Vega = 0.10 and IV increases by 1%, the option price rises by ₹0.10.

Great for:
Trading events like earnings, news, budget announcements, etc.

📈 4. Gamma (Γ) – Delta’s Accelerator

What it means:
Gamma shows how much the Delta changes when the stock price changes. It tells you how stable or unstable Delta is.

• 🛡️ High Gamma = Delta moves quickly
• 🔄 Helps in adjusting your hedges (especially for Delta-neutral traders)

Example:
If Gamma = 0.05, and stock moves ₹1, Delta will change by 0.05.

Important for:
Short-term traders, hedgers, and when options are At-the-Money.

🔴 5. Rho (ρ) – Interest Rate Influence

What it means:
Rho shows how the option price changes with 1% change in interest rates.

• 📈 Call Options: increase with higher rates
• 📉 Put Options: decrease with higher rates

Example:
If Rho = 0.10 and interest rates increase by 1%, the call option will gain ₹0.10.

📉 Rho is usually ignored in Indian markets due to low and stable interest rate impact.

📊 Summary Table of Option Greeks

🧩 Bonus: Visual Example

Stock Price = ₹100
ATM Call Option Price = ₹5
Delta = 0.5 | Theta = -0.10 | Vega = 0.20

• 📈 If stock moves to ₹101 → Option = ₹5.50
• 📆 One day passes → Option = ₹5.40
• 🌪️ IV increases by 1% → Option = ₹5.60

See how each Greek affects the price? You're already thinking like a pro.