Options 101 Course

The Greeks Part I

Introduction

Options "Greeks" are sensitivities of the option to various exposures of risk including time decay and volatility.  The names are taken from the actual Greek names.

Greek Sensitivity to
Delta Δ Change in option premium relative to change in underlying asset price (ie Speed)
Gamma Γ Change in option delta relative to change in underlying asset price (ie Acceleration)
Theta Θ Change in option premium relative to change in time left to expiration (ie time decay)
Vega Κ Change in option premium relative to the change in the asset's volatility (ie historical volatility)
Rho Ρ Change in option premium relative to changes in the Risk Free Interest Rate (ie interest rates)
Zeta Ζ Percent change in option premium per 1% change in implied volatility (ie implied volatility)


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