DEFINITION of 'Greeks'

Dimensions of risk involved in taking a position in an option (or other derivative). Each risk variable is a result of an imperfect assumption or relationship of the option with another underlying variable. Various sophisticated hedging strategies are used to neutralize or decrease the effects of each variable of risk.


Neutralizing the effect of each variable requires substantial buying and selling and, as a result of such high transactions costs, many traders only make periodic attempts to rebalance their options portfolios.

With the exception of vega (which is not a Greek letter), each measure of risk is represented by a different letter of the Greek alphabet:

Δ(Delta) represents the rate of change between the option's price and the underlying asset's price - in other words, price sensitivity.

Θ(Theta) represents the rate of change between an option portfolio and time, or time sensitivity.

Γ(Gamma) represents the rate of change between an option portfolio's delta and the underlying asset's price - in other words, second-order time price sensitivity.

ϒ(Vega) represents the rate of change between an option portfolio's value and the underlying asset's volatility - in other words, sensitivity to volatility.

ρ (Rho) represents the rate of change between an option portfolio's value and the interest rate, or sensitivity to the interest rate.

  1. Theta

    A measure of the rate of decline in the value of an option due ...
  2. Zomma

    An options greek used to measure the change in gamma in relation ...
  3. Ultima

    The rate at which the vomma of an option will react to volatility ...
  4. Lambda

    The ratio of the percentage change in an option contract's price ...
  5. Gamma

    The rate of change for delta with respect to the underlying asset's ...
  6. Beta

    Beta is a measure of the volatility, or systematic risk, of a ...
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