The Greeks Flashcards
What does Delta measure in options trading?
Delta measures how much an option’s price will change with a $1 change in the underlying asset’s price.
What does a Delta of 0.5 mean?
For a call option, a 0.5 delta means the option price will move $0.50 for every $1 move in the underlying stock.
What is Gamma in options trading?
Gamma measures the rate of change of Delta as the underlying asset’s price changes.
Why is Gamma important for options traders?
Gamma helps traders understand how stable or unstable their Delta is as the price of the underlying asset moves.
What is Theta in options trading?
Theta measures the rate of change of an option’s price due to the passage of time. It shows how much value the option will lose as expiration approaches.
What is the impact of a high Theta on options?
A high Theta means the option will lose value more quickly as expiration nears, especially for out-of-the-money options.
What is Vega in options trading?
Vega measures how much an option’s price will change with a 1% change in implied volatility.
What happens if Vega is high?
If Vega is high, the option’s price will be more sensitive to changes in volatility, which can be important in volatile markets.
What is Rho in options trading?
Rho measures how much an option’s price will change with a 1% change in interest rates.
What type of options are most affected by Rho?
Long options (both calls and puts) are more sensitive to Rho, especially those with longer expiration times.
