In Options Trading, Greeks help you understand how option prices move with changes in market conditions. These are essential for trading on exchanges like National Stock Exchange and Bombay Stock Exchange.
🔵 1. Delta (Δ) – Price Sensitivity
👉 What is Delta?
Delta tells you how much an option price will change when the underlying moves by ₹1.
Δ=∂S∂V
📌 Key Points:
- Call Delta → 0 to 1
- Put Delta → 0 to -1
- ATM options ≈ 0.5
🧠 Example:
- Call Delta = 0.5
- Nifty moves ₹100 up → Option rises ≈ ₹50
💡 Use:
- Measures directional bias
- Helps estimate profit/loss
🔻 2. Theta (Θ) – Time Decay
👉 What is Theta?
Theta shows how much value an option loses daily due to time passing.
Θ=∂t∂V
📌 Key Points:
- Always negative for buyers
- Faster decay near expiry
- Highest for ATM options
🧠 Example:
- Theta = -5
- Option loses ₹5 daily (if nothing changes)
💡 Use:
- Helps understand time decay risk
- Important for option sellers (they benefit)
🟢 3. Gamma (Γ) – Delta Change Speed
👉 What is Gamma?
Gamma tells you how fast Delta changes when price moves.
Γ=∂S2∂2V
📌 Key Points:
- High near ATM
- Increases close to expiry
- Affects volatility of option price
🧠 Example:
- If Gamma is high → Delta changes quickly → More price movement
💡 Use:
- Helps understand risk & volatility
- Important for short-term traders
⚖️ Quick Comparison
| Greek | Meaning | Impact |
|---|---|---|
| Delta | Price change | Direction 📈📉 |
| Theta | Time decay | Time ⏳ |
| Gamma | Delta change | Speed ⚡ |
🎯 Simple Way to Remember
- Delta → Direction
- Theta → Time decay
- Gamma → Speed of change
⚠️ Important Insights
- Buyers lose money due to Theta decay
- Sellers earn from Theta
- High Gamma = high risk + high reward
Understanding Greeks gives you a professional edge in options trading. Instead of guessing, you can make data-driven decisions and manage risk effectively.