Why Greeks exist
An option's price depends on five things at once, so “will this option make money?” has no single answer. The Greeks break the question into parts: how much do I make or lose if only the underlying moves? if only a day passes? if only volatility changes? Each Greek is a sensitivity — a rate of change of the premium with respect to one input, everything else held still. Finostat computes them from the live premiums; here are today's, at the money:
Delta: direction
Delta is the change in premium for a 1-point change in the underlying. Calls have delta between 0 and 1, puts between −1 and 0. An ATM option is about ±0.5; deep ITM approaches ±1 (it moves like the underlying); far OTM approaches 0 (it barely reacts). Three practical uses:
- Equivalent exposure. A 0.5-delta call on one lot behaves like being long half a lot of futures. Ten lots of 0.10-delta calls are one lot of exposure — with the same time decay as ten lots.
- Rough probability. Delta approximates the chance the option expires ITM. A 0.20-delta call is priced as a one-in-five shot. Selling it collects premium for a four-in-five chance of keeping it — and a one-in-five chance of a large loss.
- Hedging. Market makers who sell you a 0.5-delta call buy 0.5 lots of futures to be flat. As price moves their delta changes and they rebalance — which is where gamma comes in.
Gamma: how fast delta changes
Gamma is the change in delta per 1-point move. It is largest at the money and near expiry, tiny far from either. Long options have positive gamma: as the underlying moves your way, your delta grows and you make money faster; as it moves against you, delta shrinks and you lose more slowly. That convexity is what you are paying for. Short options have negative gamma: your losses accelerate and your gains decelerate. On expiry day ATM gamma explodes — a 100-point move can take a 0.5-delta option to 0.9 or 0.1 in minutes. Writers who are short that gamma call it “gamma risk”; it is why expiry-day short straddles look free for weeks and then aren't.
Theta: time
Theta is the premium lost per calendar day, all else equal. It is negative for long options and positive for short ones — the writer's income. It is highest at the money, and it accelerates toward expiry (Chapter 6). Look at the live theta above and multiply by the lot: that is the rupee cost of holding one ATM contract overnight while nothing happens. Weekends count: an option bought Friday afternoon is worth less on Monday morning with the index unchanged.
Vega: volatility
Vega is the change in premium for a 1-percentage-point change in implied volatility. It is largest at the money and for longer-dated options. Long options are long vega — they gain when the market gets more nervous, even with no move in price. This is why buying options before a big event and selling right after can lose money even when the event goes your way: IV collapses after the uncertainty resolves (“vol crush”), and vega takes back what delta gave. Chapter 8 covers it.
Rho, briefly
Rho is sensitivity to interest rates. For weekly and monthly options it is negligible; ignore it until you trade long-dated contracts.
Using Greeks before the trade, not after
Every strategy in the builder shows the position's net Greeks. Before entering, ask: what is my delta (am I secretly directional?), what is my theta (what does a flat day cost or pay?), what is my vega (what happens if fear rises or falls?), and where does gamma bite? A short iron condor with theta of +₹150/day and vega of −₹200/point is a bet that time passes quietly. A long straddle with theta −₹400/day is a bet that something happens within a few days. Reading those numbers is the difference between a strategy and a hope.