Chapter 9 · Option Greeks
The Greeks
Five numbers describing how a premium reacts to price, time and volatility.
16 of 66 · 10 min
An option's premium changes with several things at once. The Greeks separate those effects so you can see which one is driving your position.
| Greek | Measures the change in premium for | Typical range |
|---|---|---|
| Delta | A 1-unit move in the underlying price | 0 to 1 (calls), −1 to 0 (puts) |
| Gamma | How fast delta itself changes | Highest at the money |
| Theta | One day passing | Negative for buyers |
| Vega | A 1% change in implied volatility | Positive for buyers |
| Rho | A 1% change in interest rates | Usually the least important |
Worked
A call priced at Rs 28 with delta 0.60, gamma 0.04, theta −0.75, vega 0.30.
- Underlying rises Rs 10 → premium rises about 10 × 0.60 = Rs 6
- Delta then becomes roughly 0.60 + (10 × 0.04) = 1.00 — it accelerates
- One day passes with no move → premium falls about Rs 0.75
- Implied volatility rises 3% → premium rises about 3 × 0.30 = Rs 0.90
The higher-order Greeks — charm, vanna, vomma, lambda, colour — measure how the first five themselves change. They matter to market makers running large books and almost never to anyone else.
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