The Greeks, lite

The "Greeks" are numbers that describe how an option's price reacts to changes. You only need two right now.

Delta

Delta is how much an option's price moves when the underlying moves $1.

A call with a delta of 0.50 gains about $0.50 when the stock rises $1. Call deltas run from 0 to 1 and put deltas from 0 to −1. An option right at its strike ("at the money") sits around 0.50.

Delta also tells a dealer how much to hedge. Short one call with a 0.50 delta, and they need about 50 shares' worth of exposure to stay neutral.

Gamma

Gamma is how fast delta changes as price moves.

Gamma is biggest when price is near the strike and as expiry gets close. High gamma means a dealer's hedge needs adjusting quickly, which means more buying and selling in the underlying.

Two more names for later

• Theta: how much value an option loses each day just from time passing.
• Vega: how much its price changes when expected volatility changes.

Both are covered in Options Flow → The Greeks.

Quick recap

1. Delta = price change per $1 move. It's also the hedge size.
2. Gamma = how fast delta changes. It's biggest near the strike and near expiry.
3. Theta and vega come later.