There are various Options Greeks like: Delta, Gamma, Vega, Rho, Theta.
A complete guide on how these #Option Greeks impact option price.
1/ Delta:
Delta is a measure of the sensitivity of an option’s price changes relative to the changes in the underlying asset’s price. In other words, if the price of the underlying asset increases by 1 points, the price of the option will change by delta amount.
Call option has positive delta, and put option has a negative delta.
As the options become ITM, the value of delta tends towards +1 for call and -1 for put.
Delta is important greeks to determine the hedge ratio for investors who want to hedge their portfolio.
2/ Gamma:
Gamma (Γ) is a measure of the delta’s change relative to the changes in the price of the underlying asset.
If the price of the underlying asset increases by 1 points, the option’s delta will change by the gamma amount.
Long options (call/put) have positive Gamma.
Gamma decreases as options move away from ATM, i.e. as options become OTM/ITM.
Think like this, Delta is basically the velocity and gamma is acceleration as taught in the physics.