Greeks Essentials

The Greeks are four numbers that tell you exactly how your option will behave. No formulas, no math degree needed. Just know what each one means.

Delta: Direction

Delta tells you how much your option moves for every $1 the stock moves.

• Call with 0.50 delta: stock goes up $1, option goes up $0.50
• Put with -0.50 delta: stock goes down $1, option goes up $0.50

Bonus: Delta roughly equals the probability of expiring in-the-money. A 0.30 delta option has about a 30% chance of being profitable at expiration. A 0.70 delta option has about a 70% chance.

What to remember: Higher delta = more responsive to stock moves but more expensive. ATM options have ~0.50 delta. Deep ITM options have ~0.90. Far OTM options have ~0.10.

Theta: Time Decay

Theta tells you how much your option loses per day just from time passing.

A theta of -$0.05 means your option loses $5 per contract every day, even if the stock doesn't move. Over a week, that's $35 gone.

What to remember: Theta accelerates near expiration. An option with 30 days left might decay $3/day. The same option with 5 days left might decay $12/day. This is why holding options into the final week is dangerous for buyers.

Buyers hate theta. Sellers love it.

Gamma: Acceleration

Gamma tells you how much delta changes when the stock moves $1. Think of delta as speed and gamma as acceleration.

If your delta is 0.50 and gamma is 0.05, after a $1 stock move up, your delta becomes 0.55. The option gets more sensitive as it moves in your favor and less sensitive as it moves against you.

What to remember: Gamma is highest for ATM options near expiration. This is why expiration week can be wild — small stock moves cause big option swings. For now, just know gamma exists and explains why your option sometimes moves more than delta alone would suggest.

Vega: Volatility Sensitivity

Vega tells you how much your option price changes for every 1% change in implied volatility (IV).

A vega of $0.10 means if IV goes up 5%, your option gains $0.50 per share ($50 per contract). If IV drops 5%, you lose $50.

What to remember: This is why buying options before earnings can burn you. IV is high before the announcement (expensive options). After earnings, IV crashes (options get cheaper). You need a massive stock move to overcome the IV crush. Many beginners learn this the hard way.

The Cheat Sheet

You don't need to calculate these. Your broker shows them. Just glance at the numbers before you trade and make sure they align with your expectations.