The Options Greeks are a set of mathematical measures that describe how an option's price responds to changes in various market conditions. They are named after Greek letters and are essential for understanding and managing options positions.
- Delta: Sensitivity to a $1 move in the stock price. Also approximates probability of expiring ITM.
- Theta: Rate of time decay. The dollar amount an option loses per day due to time passing.
- Vega: Sensitivity to a 1% change in implied volatility. Higher Vega = more sensitive to IV changes.
- Gamma: Rate of change of Delta. Highest for ATM options near expiration — creates pin risk.
- Rho: Sensitivity to changes in interest rates. Generally minor for short-term equity options.
For wheel strategy traders, Delta, Theta, Vega, and Gamma are the four most relevant Greeks. Delta helps pick strikes, Theta is your friend, Vega is a risk to monitor, and Gamma increases as you approach expiration.
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