Option Greeks

Description

A set of measurements (Delta, Gamma, Theta, Vega) that describe how the price of an option changes in response to changes in underlying variables, such as the price of the asset or time decay.

Here is an explanation for each of the option Greeks:

Delta – Measures the rate of change in an option’s price per one-point movement in the underlying asset’s price. It can indicate the probability of an option ending in-the-money at expiration.
Gamma – Indicates the rate of change in Delta for a one-point increase in the underlying asset’s price. This helps assess the stability of an option’s Delta, providing insight into how Delta will change as the market moves.
Theta – Represents the rate at which an option’s price decreases as time progresses, also known as time decay. It quantifies the amount an option’s price will diminish every day, assuming all other factors remain constant.
Vega – Measures the sensitivity of an option’s price to changes in the volatility of the underlying asset. A higher Vega means the option’s price is more sensitive to shifts in volatility, affecting the premium cost of the option.

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