Option Greeks: Delta, Gamma, Theta, Vega

An option's price changes with the market, with time and with volatility. The Greeks measure each of these effects separately.

In short
  • Delta: how much the option moves when Nifty moves ₹1.
  • Theta: how much value the option loses each day from time passing.
  • Gamma and vega: how fast delta changes, and how much a change in volatility moves the price.

Delta

Delta is the change in an option's price for a ₹1 move in the underlying. An at-the-money Nifty call has a delta of about 0.5: if Nifty rises 100 points, the call gains roughly 50 points. Puts have negative delta. Deep in-the-money options approach 1 (or −1), far out-of-the-money ones approach 0. Delta is also often read as a rough chance of the option ending in the money.

Gamma

Gamma is how fast delta changes as the market moves. It is highest for at-the-money options close to expiry. High gamma means the position can swing from small to large exposure quickly, which is the main risk for option sellers near expiry.

Theta

Theta is the value an option loses each day if nothing else changes. Buyers pay it; sellers collect it. Time decay is slow when expiry is far away and speeds up in the last days, especially for at-the-money options.

Vega

Vega is the change in an option's price for a 1-point change in implied volatility. Options with more time left have more vega. When volatility drops after an event such as results or the budget, option prices can fall even if the market barely moves.

Putting them together

  • Option buyers need the move to come fast enough to beat theta.
  • Option sellers collect theta but carry gamma risk, especially near expiry.
  • Positions with high vega are bets on volatility as much as on direction.

Common mistakes

  • Watching only delta and ignoring how fast it changes near expiry.
  • Selling options just before a big scheduled event without accounting for gap risk.
  • Assuming theta decays evenly every day.

Common questions

What is a good delta for selling options?

Many sellers choose strikes with a delta around 0.15 to 0.30, which are further out of the money. Lower delta means less premium and less chance of the strike being reached, not zero risk.

Why does theta speed up near expiry?

The time value of an at-the-money option shrinks with the square root of time left, so the last days carry the fastest decay.

Which Greek matters most for option sellers?

Theta is the income, but gamma is the danger: near expiry a small move can turn a safe-looking position into a large loss.