Option Greeks explained: delta, gamma, theta and vega

The Greeks describe how an option's price is expected to change when something else changes. They come from an option pricing model, and they help you understand risk before you take a position.

Delta

Delta tells you how much the option price changes for a one-point change in the underlying. A call with a delta of 0.50 should gain about 0.50 for each 1-point rise in the index. Call deltas run from 0 to 1, and put deltas from 0 to minus 1. Delta is also often read as a rough chance that the option expires in the money.

Gamma

Gamma is the rate at which delta changes as the underlying moves. It is highest for at-the-money options and grows as expiry approaches. High gamma means delta can change fast, which is why at-the-money options close to expiry can swing sharply.

Theta

Theta is the amount an option loses per day just because time passes, when everything else stays the same. It is usually negative for option buyers and positive for sellers. Theta is largest for at-the-money options close to expiry.

Vega

Vega is how much the option price changes for a one percentage point change in implied volatility. Long options gain when IV rises. Short options lose. Vega is larger for options with more time left.

Putting them together

• A buyer of an at-the-money option near expiry has high gamma and high theta: big potential moves, but the premium disappears quickly.
• A seller of the same option collects theta but is exposed to gamma.
• Before earnings or events, IV often rises and falls afterwards. Vega explains why an option can lose value even if the underlying moves your way.

How Tradingraph calculates them

NSE's end-of-day file contains prices and open interest, but not implied volatility or Greeks. Tradingraph first finds the implied volatility for each option from its closing price, using the Black-Scholes model with a 7% risk-free rate and no dividends. Then it calculates the Greeks from that IV. These are simplifications, so treat the values as estimates.

Limits

• The model assumes constant volatility and no dividends. Real markets do not behave that neatly.
• Deep in-the-money or very cheap options may have no meaningful IV from a closing price, and the tool shows a dash instead of a number.

This page is for information and education only and is not trading advice.