The Greeks

Charm

Charm measures how an option's Delta changes as time passes, assuming other relevant factors remain unchanged. It is sometimes called Delta decay.

Delta

Delta measures how much an option's theoretical value is expected to change for a $1 change in the underlying asset price, assuming other relevant...

Delta as Probability

Delta is sometimes used as a rough shortcut for estimating the probability that an option will finish in the money, but Delta is fundamentally a me...

Delta Equivalent

Delta equivalent translates an options position's Delta into an approximate amount of underlying directional exposure. Example Suppose one standard...

Delta Exposure

Delta exposure describes how sensitive an option or options portfolio is to changes in the price of the underlying asset.

Delta Neutral

A delta neutral position is structured so that its net Delta is approximately zero at a particular point in time.

Dynamic Greeks

Dynamic Greeks refers to the fact that an option's Greek values change as the underlying price, time to expiration, implied volatility and other pr...

Gamma

Gamma measures how much an option's Delta is expected to change when the underlying asset price changes by $1, assuming other relevant factors rema...

Greek Exposure

Greek exposure refers to the sensitivity of an option or portfolio to the pricing variables represented by the Greeks.

Negative Delta

Negative Delta means a position generally benefits from a decrease in the underlying asset price, all else equal. Long puts typically have negative...

Negative Gamma

Negative Gamma means Delta changes against the position as the underlying makes larger directional moves. Short options generally have negative Gamma.

Negative Theta

Negative Theta means the position tends to lose value as time passes, all else equal. Long options commonly have negative Theta.

Negative Vega

Negative Vega means a position generally benefits when implied volatility falls, all else equal. Short options generally have negative Vega.

Net Delta

Net Delta is the combined Delta exposure of multiple positions in a portfolio or strategy.

Option Greeks

The Greeks are a set of measures describing how an option's theoretical value responds to changes in different variables. The five Greeks most trad...

Portfolio Greeks

Portfolio Greeks measure the combined Greek exposures of multiple options positions. A portfolio can therefore have: net Delta, net Gamma, net Thet...

Positive Delta

Positive Delta means a position generally benefits from an increase in the underlying asset price, all else equal. Long calls typically have positi...

Positive Gamma

Positive Gamma means Delta changes in a favorable convex direction as the underlying moves. Long options generally have positive Gamma.

Positive Theta

Positive Theta means the position tends to benefit from the passage of time, all else equal. Option selling strategies often have positive Theta.

Positive Vega

Positive Vega means a position generally benefits when implied volatility rises, all else equal. Long options generally have positive Vega.

Rho

Rho measures an option's sensitivity to changes in the interest rate input used in its pricing, commonly expressed for a one percentage point chang...

Second Order Greeks

Second order Greeks measure how certain option sensitivities themselves change as market variables change. Gamma is the best known example because...

Theta

Theta measures the sensitivity of an option's theoretical value to the passage of time, usually expressed as an estimated change over a specified t...

Theta Decay

Theta decay refers to the reduction in option value associated with the passage of time as measured by Theta, assuming other factors remain unchanged.

Vanna

Vanna measures the interaction between an option's Delta and implied volatility. It can be viewed as describing how Delta changes as volatility cha...

Vega

Vega measures how much an option's theoretical value is expected to change for a one percentage point change in implied volatility, assuming other...

Vega Exposure

Vega exposure describes how sensitive an option or portfolio is to changes in implied volatility.

Vomma

Vomma measures how an option's Vega changes as implied volatility changes.