Reference Shelf · Reference 7 of 8
Poster: The Greeks
The five Greeks on one wall sheet — what buyers want, what sellers want.
The Greeks are numbers that measure how an option's price reacts to change. One standard contract controls 100 shares, so every Greek's dollar effect is the Greek × 100 per contract.
| Greek | Plain meaning | If you BUY options you want | If you SELL options you want | Watch out for |
|---|---|---|---|---|
| Delta | How much the option gains per $1 move in the stock | High delta when you're sure of direction | Low delta — far-away strikes that likely expire worthless | Delta grows and shrinks as price moves |
| Gamma | How fast delta itself changes | High gamma near expiration = explosive moves | Low gamma — stability | Gamma makes positions swing wildly near expiration |
| Theta | How much value the option loses each day to time passing | Low theta — lots of time left | High theta — you collect the daily decay | Decay speeds up in the final days |
| Vega | How much the option gains per 1-point rise in implied volatility | Rising IV after you buy | Falling IV after you sell | Earnings IV crush (see below) |
| Rho | How much the option moves when interest rates change | Barely matters for short trades | Barely matters for short trades | Only matters on long-dated options |
Implied Volatility (IV) in One Glance
- IV is the market's guess of how much the stock will move, baked into option prices.
- IV high = options are expensive. Same strike, same stock — you pay more for the same bet.
- IV low = options are cheap. Buyers pay less; sellers collect less.
- IV crush: right after earnings print, IV usually collapses — win or lose. A bought option can lose money even when the stock moves your way, because the expensive fear premium vanishes.