Master your understanding of the Option Greeks with helpful examples, visualizations, and logical explanations!
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Master your understanding of the Option Greeks with helpful examples, visualizations, and logical explanations!
The option greeks are critical to learn as a beginner options trader because the greeks tell you the risks your option positions are exposed to.
Option prices, and therefore, your profits and losses, change with the stock price, expected volatility, and passage of time.
The four primary option greeks are delta, gamma, theta and vega.
Delta estimates how an option’s price changes relative to a $1 change in the stock price.
Gamma estimates how an option’s delta changes relative to a $1 change in the stock price.
Theta estimates how an option’s price will decay with the passing of each day, assuming the stock price and implied volatility remain constant.
Vega estimates how an option’s price will change relative to a 1% shift in implied volatility or expected stock price fluctuations.
The greeks can be viewed from the perspective of an individual option or an entire complex option position (position greeks).
In this video, I’ll explain the option greeks in detail, including helpful examples and data visualizations to help you deepen your understanding of these risk measurements.
0:00 Intro
0:15 Delta: Option Price vs. Stock Price
2:35 Gamma: Option Delta vs. Stock Price
5:34 Another Way to Think About Delta & Gamma
7:07 Theta: Option Price Decay
8:13 Vega: Option Price vs. Expected Stock Volatility
10:46 Individual Option Greeks vs. Position Greeks
13:43 Theta & Vega ONLY Impact Part of an Option’s Price
14:35 Learn Data-Driven Options Strategies
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