The Greeks
The collective name for the sensitivity measures — delta, gamma, theta, vega, rho — that describe how an option's price responds to changes in market variables.
The Greeks are the partial derivatives of an option's price with respect to each key input: underlying price (delta, gamma), time (theta), volatility (vega), and interest rates (rho).
Together they form a complete risk dashboard for an options position or portfolio. A risk manager checks net delta (directional exposure), net gamma (acceleration risk), net theta (daily decay), and net vega (volatility exposure) to understand P&L behaviour under different market scenarios.
Greeks interact: a short-gamma, long-theta position (selling short-dated options) collects decay but can suffer large losses if spot moves sharply.
Related Terms
Black-Scholes Model
The foundational closed-form formula for pricing European options from spot, strike, time, interest rate, and volatility.
AdvancedDelta
The rate of change in an option's price for a $1 move in the underlying. Ranges from 0 to 1 for calls and −1 to 0 for puts.
IntermediateGamma
The rate of change of delta per $1 move in the underlying — it measures how fast delta itself accelerates.
AdvancedImplied Volatility
The market's forward-looking expectation of volatility, derived by solving the options pricing model for the volatility that matches the observed premium.
AdvancedRho
The sensitivity of an option's price to a 1-percentage-point change in the risk-free interest rate.
AdvancedTheta
The daily rate of time value erosion in an option's price, assuming all else stays constant. Usually negative for long options.
IntermediateVega
The sensitivity of an option's price to a 1-percentage-point change in implied volatility.
Advanced