§ 01
| Greek | Measures | Key Behavior |
|---|---|---|
| Delta (Δ) | $/move per $1 stock change | Highest for ITM, ~0.50 at ATM, low for OTM |
| Gamma (Γ) | Rate of delta change | Highest at ATM near expiration — delta swings wildly |
| Theta (Θ) | Daily time decay ($) | Always negative for buyers; accelerates near expiry |
| Vega (ν) | $/move per 1% IV change | Highest for ATM with long time to expiry |
§ 02
Gamma is the hidden risk in short options positions. Near expiration, an ATM option’s delta can swing from 0.30 to 0.90 on a small stock move, turning a manageable position into a large directional bet.
§ 03
Look at the Greeks for an ATM option with 30 days to expiration vs. 7 days. Notice how theta increases and how gamma becomes much larger near expiration.
§ 04
You sell an ATM call with 3 days to expiration. Theta is high (good for you) but gamma is also high. Why is gamma a risk?
§ 05
§ 06
You own 10 long call contracts (1000 shares of delta exposure). Delta = 0.50. Gamma = 0.02. Stock rises $2. How many shares of equivalent exposure do you now have?
Five questions · AI feedback
Sit with the ideas.
A call option has delta of 0.60, theta of -$0.15, and vega of $0.25. The stock rises $2 today and implied volatility increases by 1%. Approximately how much does the option price change?
Why: