What are 'the Greeks' in options pricing? How do I understand them?

The ‘Greeks’ are used by traders to measure risk. They are called the Greeks because they are represented by Greek letters. Each of them measures the risk in an options contract relative to some factor or the other.

Some of the important Greeks are:


Vega measures an option's understanding to changes in the instability of the fundamental instrument.

Vega represents

  • If there is a 1 percent change in the volatility of the market, then what is the amount that an option's price transforms

  • Obviously, the longer the period of the time of expiration, the more the impact of volatility on the option.

  • If there is high volatility, an increase in volatility will increase correspondingly the worth of an option and, conversely, a fall in volatility will unconstructively affect the worth of the option.



Gamma measures the sensitivity of Delta to the price changes in the underlying stock.

Gamma is a measure of how Delta will change if there is one point price change in the underlying instrument.

Gamma is used to measure and analyze Delta. Higher gamma values specify that Delta could alter by large amounts in reaction to yet small movements in the underlying instrument's price.


Delta – This shows the sensitivity of the option’s price to the underlying stock’s price. It is the most important and widely used Greek. It calculates the number of points that an option’s price is expected to move for each point of movement in the underlying stock.

If all other variables remain the same, then Delta shows the change in the value of the option with respect to price fluctuations in the underlying instrument. It lies between 0-1 for call options and 0 to -1 for put options.


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