Option Greeks
Module Units
- 1. Introduction To Greeks
- 2. Black Scholes Model
- 3. Introduction To Delta
- 4. Delta’s Relationship With Spot And Strike Price
- 5. Delta And Time To Expiry
- 6. Delta And Volatility
- 7. Delta Adds Up
- 8. Delta Hedging
- 9. Introduction To Gamma
- 10. Gamma’s Relationship With Spot And Strike Price
- 11. Gamma And Time To Expiry
- 12. Gamma And Volatility
- 13. Important Properties Of Gamma
- 14. Introduction To Theta
- 15. Theta’s Relationship With Spot And Strike Price
- 16. Theta And Time To Expiry
- 17. Theta And Volatility
- 18. Important Properties Of Theta
- 19. Rho
- 20. Introduction To Vega
- 21. Vega’s Relationship With Strike Price
- 22. Vega And Time To Expiry
- 23. Volatility
- 24. Volatility And Normal Distribution
- 25. Types Of Volatility
- 26. The VIX Index
- 27. Volatility Smile
- 28. Delta Neutral Hedging
- 29. Calendar Spread
- 30. Diagonal Spread With Calls
- 31. Diagonal Spread With Puts
- 32. Gamma Delta Neutral Option Strategy
- 33. Gamma Scalping
- 34. Put Call Parity
- 35. Options Arbitrage
- 36. Conversion-Reversal Arbitrage
- 37. Box Spread
- 38. Conclusion
Important Properties Of Gamma
Let us summarize the relationship of Gamma with different factors:
A good way to think of Gamma is the measure of the stability of an option’s probability. If Delta represents the probability of being in-the-money at expiration, Gamma represents the stability of that probability over time.
If you're an option buyer, high Gamma is good as long as your forecast is correct. That's because as your option moves to ITM, Delta will approach towards 1 more rapidly. But if your forecast is wrong, it can drastically affect your position by rapidly lowering your Delta.
If you're an option seller and your forecast is incorrect, high Gamma is an enemy. That's because it can affect your position to work against you at a more accelerated rate- if the option you've sold moves to ITM. But, if your forecast is correct, high Gamma is your friend since the value of the option you have sold will lose value more rapidly.
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