The Greeks: Delta, Gamma, Theta, Vega in Plain English

What Are the Greeks?

Options prices don't move in a vacuum. They respond to changes in the underlying stock price, time, volatility, and interest rates. The "Greeks" are measurements that tell you exactly how sensitive your option is to each of these forces.

Think of them as dials on a dashboard. Each one tells you something different about the risk and behavior of your position. You don't need a math degree to use them — you just need to know what each one means in practical terms.

Delta: How Much Your Option Moves with the Stock

Delta measures how much an option's price changes when the underlying stock moves $1. A call with a delta of 0.50 will gain roughly $0.50 when the stock rises $1. A put with a delta of -0.40 will gain $0.40 when the stock drops $1.

Delta also gives you a rough probability estimate. A 0.30 delta call has approximately a 30% chance of expiring in the money. Deep in-the-money options have deltas near 1.0 (they move almost dollar-for-dollar with the stock). Far out-of-the-money options have deltas near 0 (they barely react to small moves).

For traders, delta tells you your directional exposure. If you own 10 call contracts with 0.50 delta, you have the equivalent exposure of 500 shares of stock.

Gamma: How Fast Delta Changes

Gamma measures the rate of change of delta. If delta is your speed, gamma is your acceleration.

When gamma is high, your delta changes rapidly with each dollar move in the stock. This is most pronounced for at-the-money options near expiration — their delta can swing from 0.30 to 0.70 on a small move, making them extremely sensitive.

This matters enormously for market makers. When they sell you an option, they hedge by buying or selling stock based on the delta. But gamma means that delta keeps changing, so they have to constantly adjust their hedge. This forced hedging activity is the foundation of gamma exposure — and it's what creates the structural levels that GammaLens tracks.

High gamma at a strike = lots of forced hedging activity = price tends to gravitate toward that level.

Theta: The Cost of Time

Theta measures how much value your option loses each day just from the passage of time. An option with -0.05 theta loses $5 per contract per day, all else being equal.

Theta accelerates as expiration approaches — an option with 30 days left decays slowly, but one with 3 days left decays rapidly. This is why 0DTE options are so volatile: theta is eating the premium alive, and any move in the stock gets amplified.

For market structure, theta is important because it drives the behavior of short-dated options. As weekly and daily expirations approach, the gamma at near-the-money strikes intensifies dramatically, which amplifies the hedging flows that create intraday support and resistance.

Vega: Sensitivity to Volatility

Vega measures how much an option's price changes when implied volatility moves by 1%. An option with 0.15 vega gains $15 per contract when IV rises by one percentage point.

This is why options can gain value even when the stock doesn't move — if volatility increases (say, before earnings), vega drives prices higher. Conversely, a "vol crush" after an event can destroy option value even if the stock moves in your favor.

GammaLens tracks Vega Exposure (VEX) across strikes to show you where the market is most sensitive to volatility changes. Large VEX at a strike means big hedging flows if vol shifts — creating structural pressure that influences price.

Putting It All Together

The Greeks don't operate in isolation. A real options position is affected by all four simultaneously:

You buy an at-the-money call. Delta gives you upside exposure. Gamma means that exposure increases if the stock rises (and decreases if it drops). Theta is slowly eroding your position's value every day. Vega means a spike in volatility helps you, and a drop hurts.

Understanding the Greeks is the first step to understanding why options market structure matters. Gamma, in particular, is the key — because it's what forces market makers to hedge, and that hedging creates the support, resistance, and momentum that moves prices.

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