Option Greeks
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Greeks are a set of calculation factors that may be used to quantify various aspects that may impact the price of an options contract. It helps you to make informed judgments about which options to trade and when to trade them. They are the core factors that affect the price of any option. Although the calculations involve certain complexities, they are conceptually simple to understand.
Basically, there are five options greeks (factors that influence the options price):
Delta: It is used to predict if an option will expire in-the-money (ITM), which means that its strike price is lower (for calls) or higher (for puts) than the underlying security's market price.
Gamma: It is used in estimating how much the Delta will vary if the asset price changes.
Theta: It is used in determining how much value an option may lose each day as it approaches expiry.
Vega: It is used in determining how sensitive an option is to big price movements in the underlying stock.
Rho: It is used in simulating the impact of interest rate fluctuations on an option.
Complete guide to understanding options greeks:
