The options Greeks in plain English: delta, gamma, theta, vega
Four numbers explain most of what moves an option price. What each one measures, with simple examples.
An option's price moves for three main reasons: the stock moves, time passes, and the market's expectation of future movement changes. The Greeks put a number on each.
Delta: sensitivity to the stock
Delta estimates how much the option price changes for a $1 move in the underlying. Call deltas run from 0 to 1 and put deltas from 0 to -1. An at-the-money option is usually near 0.50 (or -0.50 for a put). Since a standard US equity option covers 100 shares, a 0.50 delta call behaves roughly like holding 50 shares while the move is small.
Traders sometimes read delta as a rough probability that the option finishes in the money. Treat that as shorthand, not a precise forecast.
Gamma: how fast delta changes
Gamma measures how much delta changes for a $1 move. It is highest for at-the-money options close to expiration. High gamma means your exposure can change quickly, which is exciting when you are right and painful when you are wrong.
Theta: the cost of time
Theta estimates how much value an option loses per day if nothing else changes. Buyers pay theta; sellers collect it. Time decay is not linear: for at-the-money options it tends to accelerate in the final weeks before expiration.
Vega: sensitivity to volatility
Vega estimates how much the option price changes for a one percentage point change in implied volatility. If implied volatility falls, long options lose value even when the stock does not move. This is the core of the earnings "IV crush".
Putting them together
- Buying a short-dated option is a bet that the move happens soon and big enough to beat theta.
- Buying a longer-dated option lowers daily theta but adds vega exposure.
- Selling options flips every sign: you collect theta but take on gamma risk.
The Greeks are estimates from a pricing model at one moment. They change as price, time and volatility change, so check them again before you act.
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Educational, not financial advice.
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