Options Greeks Explained: Delta, Gamma, Theta, Vega
The greeks describe how an option price responds to each separate force acting on the option at once.
What are the options greeks?
The greeks are sensitivities that break an option price down into separate independent drivers. Each greek isolates one variable, answering how much the option value changes when price, time, or implied volatility moves, while everything else is held constant for the purposes of that measurement.
What do delta and gamma measure?
Delta measures how much an option price moves per one point move in the underlying, and doubles as a rough probability of finishing in the money. Gamma measures how quickly delta itself changes, which determines how often a dealer must rehedge.
- Delta: sensitivity to underlying price, from 0 to 1 for calls
- Gamma: rate of change of delta, highest at the money
- Theta: value lost per day from time decay
- Vega: sensitivity to a one point change in implied volatility
- Vanna: sensitivity of delta to a change in implied volatility
- Charm: sensitivity of delta to the passage of time
Which greeks matter most for positioning analysis?
Gamma, vanna and charm matter most for positioning analysis, because those three greeks create the ongoing dealer hedging obligations that reach the underlying. Delta, theta and vega matter more for managing an individual option position than for reading the wider market structure around a trade.
Frequently asked questions
Do I need to calculate the greeks myself?
No. Brokers and analytics platforms publish per contract greeks. Understanding what each greek represents matters far more than computing each greek by hand.