GREEKS

The option Greeks are a set of measurements that quantify an option position's exposure to risk. Options and other trading instruments have a variety of risk exposures that can vary dramatically over time or as markets move. Each of the option Greeks represents a different variable of option pricing.

Each risk measurement is named after a different letter in the Greek alphabet including delta, gamma , theta, and vega (vega is not actually a Greek letter, but it is used in context anyway). It is understand all of the Greeks, although delta is the one that is most crucial to your success. The Greeks are tools to help you decipher option pricing. Each has a specific use in trading.

Delta: Change in the price of an option relative to the change of the underlying security.

Gamma: Change in the delta of an option with respect to the change in price of its underlying security.

Theta: Change in the price of an option with respect to a change in its time to expiration (time value).

Vega: Change in the price of an option with respect to its change in volatility.

Related Articles:

• Juggling the Greeks to Minimize Risk
• Understanding the Option Greek Delta
• Evaluating the Relative Impacts of the Greeks
• Understanding Delta
• Why the Greeks are Crucial
• Dissecting an Options Delta Attribute
• The Greeks and Their Mystery Unveiled! Part I
• The Greeks and Their Mystery Unveiled! Part II

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