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The Greeks in plain English

Delta, gamma, theta and vega without the math anxiety.

11 min · Beginner

What you'll learn

• Use delta to estimate how much an option's dollar value changes per $1 stock move
• Explain how gamma, theta and vega change an option's price over time
• Combine the Greeks to estimate a position's change for a realistic day

Key takeaways

• Delta estimates the option's change per $1 stock move per share; multiply by 100 for dollars per contract.
• Gamma tells you how quickly delta changes, and it is highest for ATM options near expiration.
• Theta is the daily cost of holding a long option.
• Vega measures sensitivity to implied volatility and explains IV crush losses.
• Greeks are estimates that shift constantly; use them to plan, not to predict to the penny.

Glossary

• Delta — Estimated change in an option's price per $1 move in the stock, per share.
• Gamma — Estimated change in delta per $1 move in the stock.
• Vega — Estimated change in an option's price per 1-point change in implied volatility.
• Position delta — Delta x 100 x number of contracts; the share-equivalent exposure of a position.

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