An option's price doesn't move for one reason — it moves for several at once: the stock moved, time passed, volatility changed. The Greeks break that tangle apart, telling you exactly how much each force affects your option. You don't need the calculus behind them; you just need to know what each one measures and which ones matter for your trade.
Delta — sensitivity to the stock's price
Delta is how much the option's price changes for a $1 move in the underlying. A delta of 0.50 means the option gains about $0.50 if the stock rises $1. Calls have positive delta (0 to 1), puts negative (0 to −1). Two handy readings: delta ≈ how many "shares" of exposure the option gives you (a 0.50-delta call acts like 50 shares per contract), and delta is a rough gauge of the option's probability of finishing in the money.
Gamma — how fast delta changes
Gamma is the rate of change of delta. High gamma means your delta — and thus your directional exposure — shifts quickly as the stock moves. Gamma is largest for at-the-money options near expiration, which is why those options feel so "twitchy": a small move in the stock swings their value hard. Buyers love gamma (explosive gains); sellers fear it (explosive losses right at expiration).
Theta — time decay
Theta is how much value the option loses per day from time passing alone. It's the clock ticking against option buyers (negative theta) and in favor of option sellers (positive theta). A theta of −0.05 means the option sheds about $5 per contract per day, all else equal. Time decay accelerates as expiration nears — this is the engine behind income strategies like the wheel, where you collect premium and let theta do the work.
Vega — sensitivity to volatility
Vega is how much the option's price changes for a 1-point change in implied volatility. When IV rises, options get more expensive (good for holders, bad for sellers); when IV falls, they cheapen. Vega is why buying options right before earnings is dangerous: even if the stock moves your way, the post-earnings IV crush can drop vega-heavy options in value. Understanding vega and the expected move together is most of what you need to trade earnings sanely.
Rho — sensitivity to interest rates
Rho measures the option's sensitivity to interest-rate changes. For most retail traders on short-dated options, rho is small enough to ignore — it matters mainly for long-dated options (LEAPS) in a shifting-rate environment.
Which Greeks to watch
- Buying a directional option: delta (your exposure), theta (the daily cost of waiting), and vega (are you overpaying for volatility?).
- Selling premium (covered calls, CSPs, the wheel): theta is your friend, vega and gamma are your risks — especially into events.
- Near expiration, at the money: gamma dominates; small moves cause big swings.
Plug any option into the options Greeks calculator to see all five at once, and you'll stop being surprised by why your option moved the way it did.