What Are the Option Greeks: Delta, Theta, Gamma, Vega

Short answer: The Greeks measure how an option's price reacts to different factors, with delta tracking price moves, theta tracking time decay, gamma tracking the change in delta, and vega tracking volatility changes.

Delta

Delta measures how much an option's premium changes for a small move in the underlying. A call delta of 0.5 means the premium rises about ₹0.50 for every ₹1 rise in the underlying. Calls have positive delta, puts have negative delta, and delta also roughly indicates the chance of finishing in the money.

Theta

Theta measures time decay, the amount an option loses each day as expiry nears, all else equal. It is negative for buyers (they lose value over time) and positive for sellers (they gain as the option decays). Theta accelerates as expiry approaches, which is why near-expiry options decay fast.

Gamma

Gamma measures how fast delta itself changes as the underlying moves. High gamma means delta shifts quickly, making the position more sensitive and harder to manage, especially near the strike and near expiry. Buyers benefit from gamma on large moves; sellers are exposed to it.

Vega

Vega measures how much the premium changes when implied volatility changes. Higher vega means the option is more sensitive to volatility. Rising volatility raises premiums (helping buyers, hurting sellers) and falling volatility does the reverse. Vega matters most for longer-dated options.

Why They Matter Together

The Greeks rarely act alone. A trade can be right on direction (delta) yet lose to time decay (theta) or a volatility drop (vega). Understanding the Greeks helps you see the full set of risks in a position, not just the directional bet.

Practical Use

You do not need to calculate the Greeks by hand; broker platforms display them. Use them to understand and manage risk: watch theta if you are a buyer, vega around events, and gamma near expiry. They turn options trading from guesswork into informed risk management.

This explainer was written by The Dispatch desk to answer a question readers commonly ask. It is general information, not personalised financial advice.