Beginner · 8 min read

The Greeks: delta, gamma, theta, vega

How an option's price responds to the underlying, to time and to volatility.

The Greeks measure how sensitive an option's price is to different things. They are estimates from a pricing model, and they change as the market moves.

Delta: sensitivity to the underlying

Delta says roughly how many rupees the option price changes for a one-rupee move in the underlying. A call has delta between 0 and +1; a put between −1 and 0. An ATM option has delta near 0.5 (or −0.5). Delta is also a rough, informal guide to the market's estimate of the chance of finishing in the money.

Gamma: how delta itself changes

Gamma is the change in delta for a one-rupee move. It is highest for ATM options close to expiry, which is why their prices can swing sharply near expiry. Sellers of such options feel this as 'gamma risk'.

Theta: time decay

Theta is how much value an option loses per day if nothing else changes. Buyers pay theta; sellers collect it. Decay accelerates in the final days before expiry.

Vega: sensitivity to volatility

Vega is the change in the option price for a one-percentage-point change in implied volatility. Long options gain when volatility rises; short options gain when it falls.

Example: a call has delta 0.5, theta −₹8 and vega ₹12. If the index rises 20 points, the price changes by about +₹10. A day passing costs about ₹8. A one-point rise in implied volatility adds about ₹12. These effects combine.

• Position Greeks add up across legs (the Builder shows the total for the whole strategy).
• A position can be 'delta neutral' and still lose money to gamma or vega.