The Greeks refers to parameters which affect an option's price. They are called 'Greeks' because each is represented by a letter of the Greek alphabet:
Delta
Gamma
Vega
Theta
Rho
Delta refers to the relationship between the option's price and the Underlying, for calls, Delta is positive, for puts, Delta is negative. Gamma is the rate at which Delta is changing, a higher Gamma means Delta will fluctuate more based on changes to the Underlying. Vega is the sensitivity of the option price to changes in the Volatility of the Underlying. Theta measures the effect of time on the value of the option. Rho is the sensitivity of the option to changes in interest rates, this usually has the lowest impact on the price of an option than the other Greeks.
Contributed by: Ralph Windsor
Delta
Gamma
Vega
Theta
Rho
Delta refers to the relationship between the option's price and the Underlying, for calls, Delta is positive, for puts, Delta is negative. Gamma is the rate at which Delta is changing, a higher Gamma means Delta will fluctuate more based on changes to the Underlying. Vega is the sensitivity of the option price to changes in the Volatility of the Underlying. Theta measures the effect of time on the value of the option. Rho is the sensitivity of the option to changes in interest rates, this usually has the lowest impact on the price of an option than the other Greeks.
Related Directory Entries
External Links
The Greeks: What They Are and How to Use Themhttps://www.thinkorswim.com/tos/displayPage.tos?webpage=lessonGreeks
ThinkOrSwim guide to the Greeks.
View ThinkOrSwim in Options Market Glossary Directory
Managing by the Greekshttp://www.optioninvestor.com/page/oin/education/opt101/2009/11-20.13-04-10.html
Linda Piazza describes the basics of using the Greeks to manage options strategies like Iron Condors, with reference to Delta and Vega in particular.
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