Learn about options greeks

Pranay

Options Greeks for beginners – Ultimate guide

Option Greeks, Options

As a beginner options trader, Pranay was eager to learn about the different factors that can affect the value of an option. He heard about something called ” option greeks ” and decided to do some research to learn more.
Pranay learned that the option greeks are a set of variables that measure the sensitivity of the price of an option to various factors. The first option Greek he learned about was delta.

The Delta

Delta measures how much the option price will change for a 1-point move in the underlying stock price. For example, if Pranay owns a call option with a delta of 0.5 and the underlying stock price increases by Rs 1, the value of his option will increase by Rs 0.50.

The Gamma

Next, Pranay learned about gamma. Gamma measures how much the delta of an option will change for a 1-point move in the underlying stock price. This can be helpful for traders like Pranay, who want to understand how the value of their option will change as the underlying stock price moves.

The Theta

Pranay also learned about theta, which measures how much the option price will decline due to the passage of time. This is important because options have expiration dates, and the option’s value will decline as it approaches expiration.

The Vega

Pranay also learned about vega, which measures how much the option price will change for a 1% change in the implied volatility of the underlying stock. This can be helpful for traders who want to understand how changes in volatility can affect the value of their options.

The Rho

Finally, Pranay learned about rho, which measures how much the option price will change for a 1% change in the risk-free interest rate. This can be helpful for traders who want to understand how changes in interest rates can affect the value of their options.

Overall, Pranay found the option greeks to be a valuable tool for understanding the risks and potential rewards of trading options. He continued to study and learn about the option greeks and eventually became an experienced options trader.

In the next article we will learn indepth about option greeks. Till then, Have a profitable trading session!

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