abhishreshthaa
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OPTIONS GREEKS
Delta:
Delta= Change in the Option Premium
Change in the Underlying Price
GAMMA:
Gamma = Change in the Option Delta
Change in the Underlying Price
Vega
Vega = Change in the Option Premium
Change in the Underlying Volatility
Theta
Theta = Change in the Option Premium
Change in the Time period
Rho
Rho is the ratio of change in the option price to a unit change in the interest rate.
Rho = Change in the Option Premium
Change in the Interest
- The option Greeks are the tools that measure the sensitivity of the option price
- They Estimate the change in the option premium under various circumstances
- Determine the number of option needed in the event of hedging
- They are often used by professional traders for trading & managing the risk of large positions in options & stocks.
Delta:
- Delta is the ratio of change in the option price to a unit change in the underlying price.
- Measure the estimated change in the option premium for the change in asset price.
- ITM option have higher delta (0.8) while OTM option have lower delta (0.2)
Delta= Change in the Option Premium
Change in the Underlying Price
GAMMA:
- GAMMA is the ratio of change in the option delta to a unit change in the underlying price.
- If gamma is positive it indicates that the premium on option will rise more when stock prices rises & the premium on option will fall less when the stock price decreases.
Gamma = Change in the Option Delta
Change in the Underlying Price
Vega
- Vega is the ratio of change in the option price to a unit change in the volatility.
- Vega indicates how much change in the premium can be anticipated for a unit change in the volatility.
Vega = Change in the Option Premium
Change in the Underlying Volatility
Theta
- Theta is the ratio of change in the option price to a unit change in the time period.
- The more the passage of time, the lesser the value of an option.
Theta = Change in the Option Premium
Change in the Time period
Rho
Rho is the ratio of change in the option price to a unit change in the interest rate.
Rho = Change in the Option Premium
Change in the Interest