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Option Greeks measure the option's sensitivity for changes in the price, volatility, and expiration time. The spot price of an option as well as volatility and expiration time are all changing in the trading market. Options greeks allow traders to understand the effect of these changes on their position.
There are five options Greeks
These Options greeks allow you to measure the sensitivity to changes in spot price, volatility, and expiration time.
Optional Greeks | What does it do? |
Delta | This helps traders understand how the premium for an Option will change with a change in its underlying. Let's say that SBI stock rises from Rs 250 to R 270. Delta will inform you about the higher premium value of its Option. |
Gamma | It measures the change in delta for the change in value of the underlying instruments. Also, Delta measures the price change of premium. Gamma measures delta's speed of change. |
Theta | It calculates the impact of losing time on the price of Options. It allows traders to see how much their Option loses value each day. |
Vega | It will tell you how much Option's price will change with volatility. |
Rho | It measures the percentage change in the Option price for each change in interest rates. |
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