Greeks

Question 1

Delta

Answer 1

(1) Rate of change of option value w.r.t. 1 point change in underlying.
(2) Prob. of finishing ITM (delta slightly less than prob.)
(3) Hedge Ratio (# of futures needed to hedge option delta)

Question 2

Gamma

Answer 2

Rate of change of delta w.r.t. 1 point change in underlying

Question 3

Theta

Answer 3

Rate of option value decay per day.

Question 4

Vega

Answer 4

Rate of change of option value w.r.t. 1% change in IV

Question 5

Rho

Answer 5

Rate of change of option value w.r.t. 1% change in i.r.

Question 6

Vanna

Answer 6

(1) Rate of change of delta w.r.t. change in IV
(2) As vol increases, delta’s approach 50
(3) ‘+’ OTM, ‘-‘ ITM, zero at 0,50,100 delta

Question 7

Charm

Answer 7

(1) Rate of change of delta w.r.t. passage of time
(2) As DTE increases, delta’s approach 50
(3) ‘-‘ OTM, ‘+’ ITM, zero at 0,50,100 delta

Question 8

Volga

Answer 8

(1) Rate of change of vega w.r.t, change in IV
(2) As vol increases, Vega increases both OTM, ITM
(3) Always positive, zero at 0,50,100 delta

Question 9

Veta

Answer 9

(1) Rate of change of vega w.r.t. passage of time
(2) As DTE decreases, Vega decreases for all options
(3) Least negative at 50 delta, zero at 0,100 delta

Question 10

Speed

Answer 10

(1) Rate of change of gamma w.r.t. underlying
(2) ‘+’ for OTM Calls/ITM Puts, ‘-‘ for ITM Calls/OTM Puts
(3) Zero at 0,50,100 delta

Question 11

Color

Answer 11

(1) Rate of change of gamma w.r.t. passage of time
(2) As DTE decreases, ‘+’ ATM, ‘-‘ far enough OTM
(3) Zero at 0,100 delta (flips sign far enough OTM/ITM)

Question 12

Zomma

Answer 12

(1) Rate of change of gamma w.r.t. change in IV
(2) As vol increases, ‘-‘ ATM, ‘+’ far enough OTM
(3) Zero at 0,100 delta (flips sign far enough OTM/ITM)(

Question 13

Theta w.r.t. passage of time/IV

Answer 13

(1) As time passes, OTM/ITM theta declines, ATM increases exponentially
(2) As vol increases, OTM/ITM theta increases. Increases linearly (1:1) ATM