Greeks

The Greeks are a set of numbers that tell an options trader how much an option's price is expected to change when something around it changes — the price of the underlying stock, the passage of time, a shift in volatility, or a move in interest rates. Instead of guessing how an option will react, a trader can look at its Greeks and get a rough forecast, updated constantly as the market moves.

Each Greek isolates one variable. Delta measures how much the option's price moves for a $1 move in the underlying stock. Gamma measures how much delta itself changes as the stock moves, essentially the "speed" of delta. Theta measures how much value the option loses per day simply from time passing, since options have an expiration date and lose extrinsic (time) value as that date approaches. Vega measures sensitivity to changes in implied volatility, the market's expectation of how much the stock will swing. Rho measures sensitivity to interest rate changes, which usually matters least for short-term trading.

The nuance that trips people up is that these numbers are not fixed — they are estimates from an options pricing model at a single moment, and they shift constantly as the stock price, time to expiration, and volatility change. A delta of 0.50 right now can become 0.70 an hour later if the stock rallies. Traders also sometimes assume Greeks predict what will happen; they actually describe sensitivity at the current instant, not a guaranteed future path.

It's also easy to confuse an option's Greeks with the underlying stock's behavior. The stock itself has no Greeks — they exist only because an option's value is derived from the stock plus time plus volatility plus rates, all mixed together.