It's All Greek to Me: The Alphabet of Options

Greeks? Although I wish I could say that a plate of piping spanokopita would endow you with unbounded option trading knowledge, I can assure that the Greeks we will discuss are a formidable asset. In the world of options trading, the "Greeks" are crucial to the understanding of option prices. The Greeks are derived from the option pricing model. Typically the price of an option changes with time, or direction or time till expiration, implied volatility etc. All these can be quantified and measured using the various 'Greeks'.  

The greeks provide very useful insight on how a specific options in your portfolio will affect the profitablity of your portfolio.  You'll typically hear of traders saying that they are 'long delta' or 'short delta' in terms of direction. Or you'll hear of them say that they have positive or negative theta. What all these mean would be a bit more clear once we dive into this a bit more deeper.

In the next four posts, we will discover the relevance of the various options greeks like theta, delta, gamma, rho and vega. 

Image Source: Options Playbook