Lesson 2 of 8 · 2 min
The Greeks
Delta, gamma, theta and vega in plain language.
The Greeks describe how an option's value changes when something else changes.
| Greek | Measures sensitivity to | Plain meaning |
|---|---|---|
| Delta | The underlying's price | Roughly how much the option moves for a 1-point move in the underlying |
| Gamma | Changes in delta | How fast delta itself changes as price moves |
| Theta | Time | How much value the option loses per day, all else equal |
| Vega | Implied volatility | How much value changes for a 1-point change in implied volatility |
Gamma matters most here
Gamma is highest for options with strikes near the current price, and it grows as expiration approaches. That's why short-dated, near-the-money options can have outsized effects on hedging flows.
Key Insight
Options delta (a Greek) and orderflow delta (ask minus bid volume) are different things with the same name. Context tells you which one someone means.
Trading implication
You don't need to price options to trade futures. You do need to know that delta and gamma drive how dealers hedge — which is the next lesson.
Continuing marks this lesson complete. Your progress stays in this browser.