OPTIONS FIELD GUIDE · 03
The Greeks
Greeks are model-based sensitivities. They estimate how theoretical option value may respond when one input changes while the others are held constant.
Approximate option-price change for a $1 move in the underlying. Calls usually have positive delta; puts negative.
Approximate change in delta for a $1 underlying move. Delta changes as the underlying moves.
Approximate value change for one day passing, with other inputs unchanged. Long options commonly have negative theta.
Approximate value change for a one-volatility-point IV move. Long calls and puts commonly have positive vega.
Approximate value change for a one-percentage-point rate move. Usually more material for longer-dated contracts.
Read the units before reading the number
These local approximations can diverge from actual P/L. Larger shocks make curvature and interactions between inputs increasingly important.
Where the sensitivities concentrate
Especially close to expiration, delta can change quickly around the strike.
Longer-dated options generally have more exposure to changes in IV.
Extrinsic value has less time remaining and can decay nonlinearly.
Portfolio Greeks add position direction and size
A short contract reverses the sign of the option’s quoted Greeks; each standard equity contract usually represents 100 shares. Portfolio values therefore aggregate approximately as quoted Greek × contracts × 100 × position sign. Multi-leg positions can neutralize one sensitivity while retaining another.
The pricing model, implied-volatility input, rate and dividend assumptions, and quote quality all influence the result. Recalculate them as spot, time, and volatility change.
See the Greeks of a complete position.
Build multiple option legs plus an aggregate stock position, then inspect portfolio Delta, Gamma, Theta, and Vega.