The Greeks describe how an option's price reacts to one thing changing at a time. They let traders talk about risk in the same language regardless of strike or expiry.
- Delta
- How much the option moves per $1 move in the underlying. A delta of 0.5 means about 50 cents per dollar. Often read loosely as the chance of finishing in the money.
- Gamma
- How fast delta itself changes. It's highest for at-the-money options close to expiry.
- Theta
- How much value the option loses per day, all else equal.
- Vega
- How much the option moves per one-point change in IV.
How they relate
Buyers of options have positive gamma and vega and pay theta: they benefit from movement and rising volatility and lose a little every day waiting for it. Sellers have the opposite. Nothing here is free; you pay for one exposure with another.
Delta hedging
A market maker who sells a call with a 0.4 delta can buy 0.4 of a coin to offset price risk. As the price moves, delta changes and the hedge has to be adjusted. That constant adjustment connects the options market to spot, and it's the basis of the dealer-gamma lesson later in this course.