Explain the Option Greeks?
The price of an Option depends on certain factors like price and volatility of the underlying, time to expiry etc. The option Greeks are the tools that measure the sensitivity of the option price to the above-mentioned factors. They are often used by professional traders for trading & managing the risk of large positions in options & stocks. These Option Greeks are: Delta: is the option Greek that measures the estimated change in option premium/price for a change in the price of the underlying. Gamma: measures the estimated change in the Delta of an option for a change in the price of the underlying Vega: measures the estimated change in the option price for a change in the volatility of the underlying. Theta: measures the estimated change in the option price for a change in the time to option expiry. Rho: measures the estimated change in the option price for a change in the risk free interest rates.
The price of an Option depends on certain factors like price and volatility of the underlying, time to expiry etc. The option Greeks are the tools that measure the sensitivity of the option price to the above mentioned factors. They are often used by professional traders for trading and managing the risk of large positions in options and stocks. These Option Greeks are: Delta: is the option Greek that measures the estimated change in option premium/price for a change in the price of the underlying. Gamma: measures the estimated change in the Delta of an option for a change in the price of the underlying. Vega: measures estimated change in the option price for a change in the volatility of the underlying. Theta : measures the estimated change in the option price for a change in the time to option expiry. Rho : measures the estimated change in the option price for a change in the risk free interest rates.
